Personal Money Management
Copyright Washington State Department of Financial Institutions.
Disclaimer
This course is developed for educational purposes and non-commercial use. It should not be construed as
endorsement for any financial products or services. It in no way intends to convey legal, real estate,
employee benefits, tax, insurance, or financial planning advice. It is a simple overview to educate those
who are new to these subjects. Consultation with a professional is recommended for individual advice.
These topics are complicated, dynamic, and constantly changing. Please check for current regulations,
rules and laws.
2009
1
Money Management Course Outline
Topics/Learning
Objectives
Introduction – Your
financial life and the
time value of money
Unit 1: Financial
Goals
Class Activities
Assignments
Must Cover
If time permits
Complete financial behavior
inventory
Financial life cycle
Time value of money
Calculations of time value of
money
Identify and prioritize
personal financial goals
Needs and wants
SMART goals
Values Auction
Unit 2: Spending
plan
Financial dreams and
nightmares
Time value of money
Check out the price of houses
Estimate what you need to
retire
Activities 8 through 16 on the
spending plan
Student uses own
information to complete
Spending plan worksheet
Debt Reduction Plan
Income
Fixed expenses.
Variable expenses.
Discretionary expenses.
This unit will take the most time
and both spending plan and debt
reduction plan should be
created.
Unit 3: Evaluate
debit and credit
cards
Compare ATM/Debit/Check
cards
Evaluate a credit card offer
Evaluate a credit card
Debit cards
Bank and credit unions
Credit cards do’s and don’ts
Correcting errors
Frontline: Secret history of the
credit card
http://www.pbs.org/wgbh/pages/f
rontline/shows/credit/view/
Unit 4: Organizing
your records
Balance a check book
Balance a check book
Financial records
Balancing a check book
Create an inventory of
possessions
Unit 5: Protect
yourself
Unit 6: Saving
money
Reading a credit report
Review articles on identity
theft
Find good websites to help
you save money.
High cost financial services
Credit report
Saving tips
Obtain credit report
2009
Savings tips and knowledge
quiz
Identify savings tips
Video: Stolen Futures
2
Personal Money Management 90-minute Session
Topic
Financial goals
Activities
Financial dreams and
nightmares
Must Cover
Creating and prioritizing
personal financial goals
If Time Permits
Values auction
Spending plan
Needs and wants
Fixed, variable and
discretionary expenses
Credit card quiz or play
credit game
Difference between needs
and wants
Detailed demonstration
of fixed, variable and
discretionary expenses
Credit card evaluation
Manage credit and
debt
2009
Identity theft
Assessing credit offers
Student loans
3
Table of Contents
Money Management Course Outline ...........................................................................................................2
90-minute Session .........................................................................................................................................3
Table of Contents ...........................................................................................................................................4
Personal Money Management ......................................................................... Error! Bookmark not defined.
About this course for instructors ..................................................................................................................7
About this course for students .....................................................................................................................8
Activity Introduction: Current Financial Behavior Evaluation .................................................................9
What skills will personal money management give you? ........................... Error! Bookmark not defined.
Money Management for a Lifetime .............................................................................................................10
Time Value of Money Shows the Benefits of Saving ................................................................................11
Future Value of a Sum of Money Now .......................................................................................................12
Set Aside Money Today for Future Goals .................................................................................................13
What Will You Have if You Save Every Year? ..........................................................................................15
What Do You Have to Save Every Year to Achieve a Financial Goal? .....................................................16
Planning For Uncertainty ...........................................................................................................................17
Unit 1: Set Financial Goals .........................................................................................................................19
Summary for Financial Goals ................................................................................................................19
Assessing Your Interests and Personal Values ....................................................................................19
Values Auction ...........................................................................................................................................19
Auction Bidding Process .......................................................................................................................20
Activity 1: Values Auction ......................................................................................................................20
Activity 2: Values Auction Reflection and Discussion ...........................................................................21
Needs vs. Wants ........................................................................................................................................21
Activity 3: Needs and Wants .................................................................................................................22
Set Goals ...................................................................................................................................................22
Use the SMART approach to set realistic goals ....................................................................................22
Education ...............................................................................................................................................23
First House ............................................................................................................................................23
Retirement .............................................................................................................................................23
Other Goals ...........................................................................................................................................24
Activity 4: Check Out Your House Value (or Other Houses) .................................................................25
Activity 5: Estimate How Much You Will Need When You Retire? .......................................................25
Activity 6: Identify What You Want to Achieve Financially This Year? ..................................................25
Activity 7: Identify and Prioritize Personal Financial Goals ...................................................................26
Online Resources: .....................................................................................................................................26
Unit 2: Develop a Spending Plan to Invest in Your Future ......................................................................27
Benefits of a Spending Plan ......................................................................................................................27
A spending plan help you: .....................................................................................................................27
Identify Income and Expenses - Calculate Your Spending Plan ...............................................................28
Steps to Creating a Spending Plan .......................................................................................................28
Step One: Calculate Monthly Income ...................................................................................................29
Activity 8: Spending Plan Worksheet – Income Section .......................................................................29
Step Two: Calculate Fixed, Variable, and Discretionary Expenses ......................................................30
Activity 9: Calculate Your Fixed Expenses ............................................................................................30
Activity 10: Calculate Your Variable Expenses .....................................................................................31
Activity 11: Calculate Your Discretionary Expenses .............................................................................32
Step Three: Calculate Net Income ........................................................................................................33
Activity 12: Calculate Your Net Income .................................................................................................33
Activity 13: Calculate Expense Percentage of Total Expense ..............................................................34
Step Four: Analyze Expenses and Make Spending Plan Adjustments .................................................35
Activity 14: Identify Spending Plan Adjustments ...................................................................................35
Identify Your Debts to Pay Down ..........................................................................................................36
2009
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Activity 15: Identify Debts to Pay Down.................................................................................................36
Activity 16: Develop a Debt Reduction Plan ..........................................................................................37
Other Spending Plan Tools ...................................................................................................................38
Success Tips for Using a Spending Plan ..............................................................................................38
Summary—Creating a Spending Plan: .................................................................................................39
ACT- Implement Your Plan—Assess--Adjust. ...........................................................................................39
Action Checklist .....................................................................................................................................39
Online Resources ......................................................................................................................................39
Unit 3: Evaluate ATM/Debit/Check Cards and Credit Cards ....................................................................41
Electronic Funds Transfer..........................................................................................................................41
ATM Cards, Debit Cards and Check Cards ...............................................................................................42
Evaluating Debit Cards ..............................................................................................................................42
Activity 13: Compare ATM/ Debit/ Check Cards ..................................................................................44
Check your statements for errors ..............................................................................................................44
Your Rights ............................................................................................................................................46
Protect Your Debit Card ........................................................................................................................46
Safety Tips for Using Bank or Credit Union Accounts ...............................................................................47
Tips to Avoid Banking Fees .......................................................................................................................47
Why a bank or credit union may not open an account for you. .................................................................48
What Is Credit? ..........................................................................................................................................49
Why are Your Credit History and Credit Score so Important? ..............................................................49
Credit Cards ...............................................................................................................................................49
Evaluating Credit Cards -- How Will You use Your Credit Card? .........................................................49
Four Types of Credit Cards—Which One is Right for You? ..................................................................49
Review Terms and Conditions When Evaluating Credit Cards .................................................................51
Activity 18: Evaluating a Credit Card Offer ...........................................................................................55
Activity 19: Credit Card Account Comparison .......................................................................................57
Credit Card Concerns—Lost/Stolen Cards or Errors.................................................................................58
What are Your Liability Limits? ..............................................................................................................58
What Can You do About Billing Errors? ................................................................................................58
What if the Item You Purchased is Damaged? .....................................................................................59
Activity 20: Correct an Error on Your Credit Card Bill--Steps and Information to Supply ....................59
Lost or Stolen Credit Cards ...................................................................................................................59
Unsolicited Cards ..................................................................................................................................59
Credit Card Do’s and Don’ts ..................................................................................................................59
Unit 4: Organizing Your Records ..............................................................................................................61
Tips to Get Organized ................................................................................................................................61
Organize the Records You Have to Keep .................................................................................................61
What Financial Records to Keep and for How Long?................................................................................62
Reasons You Should Balance Your Checkbook Register Monthly .......................................................63
Activity 21: Checkbook Register and Account Statement Balancing ....................................................64
Online Resources: .....................................................................................................................................66
Unit 5: Protect Yourself from Costly Services, Identity Theft and Fraud ...............................................67
Check–Cashing Stores ..............................................................................................................................67
Alternatives to Check Cashing Stores .......................................................................................................67
Payday Loans ............................................................................................................................................68
Tips to Avoid High Cost Financial Services ...............................................................................................69
Credit Reports ............................................................................................................................................70
Identity Theft ..............................................................................................................................................70
Advice to Avoid Identity Theft ................................................................................................................71
Activity 22: Review articles on ID Theft, Spyware, Phishing,etc. ..........................................................72
What to do if you are a Victim of Identity Theft .....................................................................................72
Fraud ..........................................................................................................................................................73
The Major Types of Fraud .....................................................................................................................74
Take Action against Fraud ....................................................................................................................75
Internet Fraud ........................................................................................................................................76
2009
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Activity In-Class: Protect Yourself --Take Quizzes on Identity Theft, Spyware, Phishing, Spam Scam
Slam, Online Shopping ..........................................................................................................................76
Online Resources: .....................................................................................................................................76
Unit 6: Learn Money-Saving Tips ...............................................................................................................77
Tips for Women..........................................................................................................................................80
Activity 23: Savings Tips and Knowledge Quiz .....................................................................................80
More Money Saving Tips ...........................................................................................................................81
Conserve - Spend Sensibly; Pay Wisely ...................................................................................................82
Activity 24: Identify Savings Tips for You (and Your Family) ................................................................82
Strategies for Buying Well .........................................................................................................................82
Online Resources: .....................................................................................................................................82
Summary: BEGIN NOW- Take Action with Your Finances! ....................................................................83
Works Cited ..................................................................................................................................................84
2009
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About this course for instructors
Personal Money Management is a college course that teaches learners the basics of managing personal
income and expenses and recordkeeping. They will be required to develop personal financial goals and a
personal spending plan. They will also learn ways to save and plan for future financial needs.
The topics that will be covered in this course are:
 Setting short-term and long-term financial goals
 Developing and monitoring a spending plan (fixed, variable and discretionary expenses)
 Analyzing actual expenses against suggested expenses
 Developing money-saving habits to build savings to meet financial goals
 Evaluating and managing debit and credit cards
 Developing a financial record-keeping system
 Avoiding identity theft and fraud
At the end of this class, students will be expected to:
 Articulate their values and set short- and long-term financial goals
 Create a personal spending plan.
 Evaluate credit card offers and select the best for their particular situation.
 Identify opportunities to save money – demonstrate strategies for comparison pricing, getting bids, etc.
 Create a system for tracking expenses against budget, including credit card monitoring and check book
balancing.
 Identify ways to avoid identity theft and fraud.
 Create an action plan for saving money.
2009
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About this course for students
Financial success and security begin with sound education. Learning about Personal Money
Management will benefit every adult - college students, working singles, married couples, married couples
with children, divorced parents with children, or grandparents.
Adopting sound financial practices makes it easier to buy a house, finance college education, or start a
retirement fund. In addition, identifying financial needs and setting financial goals helps avoid costly
mistakes.
What will money management do for you? You will learn to develop financial goals and develop action
steps toward achieving your goals of building a savings/investment nest egg. Setting financial goals helps
you be smart about spending, maintaining good credit, managing money, and saving and investing for the
future. Become knowledgeable and savvy--learn personal money management to evaluate alternatives, to
make informed decisions, to reduce debt, to take control of your personal financial choices and to improve
your quality of life. Financial knowledge helps you avoid costly mistakes and unwise investment decisions.
Avoid being taken in investment scams, incurring too much personal debt, spending money unconsciously
or thoughtlessly, delaying saving for house, emergencies, children’s college or retirement.
2009
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Activity Introduction: Current Financial Behavior Evaluation
The goal of all financial education is to get you to adopt important behaviors that will ensure your financial
security. Check all the financial behaviors that you engage in. Do this inventory every year
Check if
you do
this.
Pay all my bills and loan payments on time.
Have a recordkeeping system for my financial affairs.
Balance my checkbook and monitor all my financial transactions monthly.
Track all my expenses.
Use a spending plan or budget.
Have an emergency savings fund.
If yes, how many months of expenses:
1-3 months ____4-6 months ____
Save or invest money from every paycheck. If yes, percent paycheck saved __%
Save for long-term goals.
If yes, which goals: (Check any that apply.)
Education____ Car ____ Home ____ Home upgrade ____ Vacation _____
Plan and set goals for financial future.
Have money in more than one type of investment. If yes, check any that apply:
Individual stocks ____ Mutual Funds ____ Bonds ____ Real Estate ____
Treasury bills or CDs ____ International ____ Commodities ____
Calculated net worth in the past two years.
Participate in employer’s retirement plan. 401(k) ___ 403 (b) __ Other: ____
Have insurance to protect my loved ones.
If yes, check any that apply:
Health ___ Life___ Property___ Auto___ Disability ___ Umbrella _____
Put money into other retirement plan:
Roth IRA ___ Traditional IRA __ SEP or SIMPLE IRA __
Review my credit report annually.
Pay credit card balances in full each month.
Research and compare offers before applying for a credit card or loan.
Do my own taxes.
Read about personal money management to improve how I’m doing.
2009
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Money Management for a Lifetime
Starting Out
Protect
financial
dreams




Avoid
financial
nightmares



Set exciting goals
Make a spending
plan
Establish a
record-keeping
system
Establish good
credit habits and
history
Having excessive
credit card debt
Taking too much
in student loans
Victimized by
identity theft
Twenties









Create an
emergency fund
Learn about savings
instruments
Learn about bonds
Get adequate auto,
health, and rental
insurance
Form a financial
team with your
partner
Lacking financial
skills
Focusing on shortterm satisfaction
and not long-term
needs
Destroying
relationships over
financial problems
Financial ruin from
inadequate
insurance
Twenties - Thirties








Reach financial goal
of purchasing a
home
Establish a 401k
account
Start IRAs
Learn about major
asset classes and
their risk and return
Create a plan to
financially survive a
job change
situation.
Not taking
advantage of the
time value of money
by saving early
Unable to invest
because lacking
understanding of
investments and
their characteristics
Taking on too much
debt - Bankruptcy
Thirties



Establish taxadvantaged
education funds for
children
Create a will to
protect your assets
Expand investment
portfolio by asset
allocation
Forties - Fifties







Lack of
diversification in
investment portfolio
Taking on too much
debt - Bankruptcy
Untimely death with
no will






2009
Upgrade and
maintain house
Reach financial goal
of adequate funds for
kids’ college
education
Asset allocation and
rebalanced
investment portfolios
to accommodate
retirement
Able to care for
parents if desired
Using home equity to
spend or pay off old
debts
Unable to pay for
major replacements
on house
Taking loans on
401Ks
Not enough money
for kids’ college
educations
Not able to care for
parents
Bankruptcy
Sixties - Plus










Paid all debts in full
Adequate health
and long term care
insurance coverage
Estate plan
Updated will
Ladder ed
investments or
annuities to cover
for retirement
income
Income to last
lifetime
Not able to care for
self
Inadequate health
coverage
Not enough income
for retirement
Victimized by fraud
because of lack of
education.
10
Time Value of Money Shows the Benefits of Saving
The time value of money is a powerful tool. When you understand how it works, it will change your financial
life. You will understand why it’s important to build your financial security now not later. You will be able to
evaluate financial options just as the professionals do. Also, studies have shown that you who understand
the time value of money are less susceptible to fraud. It is the basis for pricing for just about every available
financial product.
If you put $100 in the bank for 2 years and get 5% per year, you would have $5 in interest the first year and
$5 in interest the second year, right? Not exactly. In the first year you would get $5 in interest. However, in
the second year you would actually get 5% times $105, or $5.25 in interest. Why the fuss about a quarter?
Because over a long period of time, it becomes a big deal.
Let's say you have $1000 in the bank over 10 years and you spend whatever interest you earn each year,
which would only be $50 a year times 10 years, or $500. But, if you leave the interest in the bank, you earn
$628.90 in interest, or $128.90 more. That's the beauty of compounding.
$1000  (1  0.05)10  $1628.90
2009
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So money invested over time earns interest income. Four versions of the time value of money will be
reviewed in this section:
1. Future value of a sum of money now: This allows you to determine how much you will have in the
future if you put aside some money now.
2. Set aside money today for future goals. If you have a financial goal in the future, say a down
payment for a house in 10 years, this will tell you how much you have to set aside today.
3. What will you have if you save every year? This will let you calculate how much money you will have
in the future if you set aside a certain amount of money every year.
4. What do I have to save every year to achieve a financial goal? How much money must you save
every year to reach a financial goal.
So, the important point is to start saving now. Saving now gives compounding more time to work for you.
Say you put $10,000 away for 5 years at 10%. At the end of 5 years, you’ll have about $16,110. If you put
$5,000 (half the amount) away for 40 years at 5% (half the return), you’ll end up with over $35,000. Saving
over a long period of time can overcome a low return.
Future Value of a Sum of Money Now
Here is a table which shows what will happen to $1000 at various levels of return and various years. To find
the value of $1000 at 10% for 5 years, look down the first column until you get to 10% and across until you
get to 5 years (the first column). You can see that the value is $1611 for $1000. For $10,000, simply
multiply the value by 10 for $16,110.
Table 1
Future Value per $1000 Investment Made Now
5
10
15
2%
$1,104
$1,219
$1,346
3%
$1,159
$1,344
$1,558
4%
$1,217
$1,480
$1,801
5%
$1,276
$1,629
$2,079
6%
$1,338
$1,791
$2,397
7%
$1,403
$1,967
$2,759
8%
$1,469
$2,159
$3,172
9%
$1,539
$2,367
$3,642
10%
$1,611
$2,594
$4,177
11%
$1,685
$2,839
$4,785
12%
$1,762
$3,106
$5,474
13%
$1,842
$3,395
$6,254
14%
$1,925
$3,707
$7,138
15%
$2,011
$4,046
$8,137
(Assumes annual compounding of interest)
Return
20
$1,486
$1,806
$2,191
$2,653
$3,207
$3,870
$4,661
$5,604
$6,727
$8,062
$9,646
$11,523
$13,743
$16,367
Number of Years
25
30
$1,641
$1,811
$2,094
$2,427
$2,666
$3,243
$3,386
$4,322
$4,292
$5,743
$5,427
$7,612
$6,848
$10,063
$8,623
$13,268
$10,835
$17,449
$13,585
$22,892
$17,000
$29,960
$21,231
$39,116
$26,462
$50,950
$32,919
$66,212
35
$2,000
$2,814
$3,946
$5,516
$7,686
$10,677
$14,785
$20,414
$28,102
$38,575
$52,800
$72,069
$98,100
$133,176
40
$2,208
$3,262
$4,801
$7,040
$10,286
$14,974
$21,725
$31,409
$45,259
$65,001
$93,051
$132,782
$188,884
$267,864
45
$2,438
$3,782
$5,841
$8,985
$13,765
$21,002
$31,920
$48,327
$72,890
$109,530
$163,988
$244,641
$363,679
$538,769
Use Table 1 - Future Value per $1,000 Investment Made Now above to answer these questions:
2009
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Question 1
Think of that $1000 you spent on soda and candy in 1996. If you put that money in the bank at 5%
interest per year, what will you have after 10 years in 2006? If you purchased $1000 in a stock index
fund, what would you have?
If you did the following in 1996 . . .
Bought $1000 of soda and candy (that’s about $20
a week)
Put $1000 in the bank at 5%
Bought $1000 of a stock index. ($1 in a stock index
fund in 1996 would be worth $1.91 in 2006.
What would be the value in 2006?
Use Table 1- Future Value per $1000 Investment Made Now, to answer the following questions:
Question 2
You put $2000 into a 529 plan to save for your kids’ college expenses and earned 8% return. What
would you have in 20 years?
Question 3
You put $4000 into an IRA to save for your retirement and earned 9% return. What would you have
for your retirement in 30 years?
Question 4
About 57% of people (especially the younger ones) who leave companies cash out their retirement
benefits of $8445. If you left this money in a retirement plan for 40 years at a return of 8%, what
would be the value at retirement?
Set Aside Money Today for Future Goals
Now let’s do a little math to figure out how much you need to set aside now to achieve your financial goals
in the future. To do this, we take the same equation we used in compounding and algebraically solve for
what we need to set aside today. Let’s say you want to pay cash for a car in five years. This used car is
going to cost you $8000. How much would you have to set aside today at 8% return a year?
2009
13
To handle what we need to set aside today for a future sum, we have created a table that allows you to
look up what you need to set aside today for $10,000 in the future.
Table 2
Money to set Aside Today for $10,000 in the Future
(Present Value of Sum of Money in the Future)
Return
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
5
$8,626
$8,219
$7,835
$7,473
$7,130
$6,806
$6,499
$6,209
$5,935
$5,674
$5,428
$5,194
$4,972
10
$7,441
$6,756
$6,139
$5,584
$5,083
$4,632
$4,224
$3,855
$3,522
$3,220
$2,946
$2,697
$2,472
15
$6,419
$5,553
$4,810
$4,173
$3,624
$3,152
$2,745
$2,394
$2,090
$1,827
$1,599
$1,401
$1,229
Number of Years
20
25
30
$5,537 $4,776 $4,120
$4,564 $3,751 $3,083
$3,769 $2,953 $2,314
$3,118 $2,330 $1,741
$2,584 $1,842 $1,314
$2,145 $1,460
$994
$1,784 $1,160
$754
$1,486
$923
$573
$1,240
$736
$437
$1,037
$588
$334
$868
$471
$256
$728
$378
$196
$611
$304
$151
35
$3,554
$2,534
$1,813
$1,301
$937
$676
$490
$356
$259
$189
$139
$102
$75
40
$3,066
$2,083
$1,420
$972
$668
$460
$318
$221
$154
$107
$75
$53
$37
45
$2,644
$1,712
$1,113
$727
$476
$313
$207
$137
$91
$61
$41
$27
$19
(Assumes annual compounding of interest)
2009
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Question 5
Here are some typical goals. How much will each of the following goals cost?
Down payment on house
Wedding
Children’s college tuition
Starting your own business
Retirement
Use Table 2-Money to set Aside today for $10,000 in the Future above to answer these questions:
Question 6:
You want to put $40,000 down on your first house 10 years from now. You expect an investment
rate of 7%. How much would you have to set aside today?
Question 7:
You want to start a business with $50,000 in 15 years. You expect a return rate of 8%. What would
you have to set aside today?
What Will You Have if You Save Every Year?
Setting goals is the fun part of the financial plan. It’s nice to think about the nice house you’re going to buy
or the retirement you will enjoy. However, there may be a big difference between what you have today
($1,000) and your financial goal for the future ($1 M for retirement). How do you get from here to there?
For some goals, it seems impossible to set aside enough money now to and achieve the goal. Most of us
don’t have $10,000 that we can just tuck away for the future. You can steadily save every year to reach
your goals. In other words, you can apply the future value of money formula to a stream of savings over
many years.
Here are some examples that may apply to your individual situation. What if you save $25 (about the cost
of a coffee/tea/pop five days) a week? What would that be worth in 40 years?
You can calculate that saving $25 a week can grow to become $152,602.02 in 40 years. If you scrimp and
save a bit more and raise your savings to $50 a week, the amount earned in 40 years doubles to over
$300,000. Really saving very hard and raising it to $75 a week makes it very close to half a million dollars
in 40 years.
Interest rate
5%
5%
5%
Savings per week
$25
$50
$75
Number of Years
40
40
40
Future Value
$152,602.02
$305,204.03
$457,806.05
(Assumes daily compounding of interest.)
So, the amount of savings is one factor that can increase what you will have in 40 years. What about
finding better ways to invest your money? If you can find an 8% return (which would be a combination of
stocks and bonds over a long period) and you save at $75 a week, you could increase your account to
over $1 million over 40 years.
Interest rate
8%
8%
8%
Savings per week
$25
$50
$75
Number of Years
40
40
40
Future Value
$349,100.78
$698,201.57
$1,047,302.35
(Assumes daily compounding of interest.)
2009
15
The following table was compiled as a quick way of calculating what money you would have in the future.
Say you put away $1000 a year for 15 years and you get 5% on your money. At the end of the 15 years,
you will have $21,579. That is a lot more that just putting away $1000 once for 15 years at 5%, which would
give you $2079 from Table 1.
Table 3
What Will You Have if You Save $1,000 Every Year?
(Future Value of Saving $1000 Every Year)
Return
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
5
$5,309
$5,416
$5,526
$5,637
$5,751
$5,867
$5,985
$6,105
$6,228
$6,353
$6,480
$6,610
$6,742
10
$11,464
$12,006
$12,578
$13,181
$13,816
$14,487
$15,193
$15,937
$16,722
$17,549
$18,420
$19,337
$20,304
15
$18,599
$20,024
$21,579
$23,276
$25,129
$27,152
$29,361
$31,772
$34,405
$37,280
$40,417
$43,842
$47,580
20
$26,870
$29,778
$33,066
$36,786
$40,995
$45,762
$51,160
$57,275
$64,203
$72,052
$80,947
$91,025
$102,444
Number of Years
25
30
$36,459
$47,575
$41,646
$56,085
$47,727
$66,439
$54,865
$79,058
$63,249
$94,461
$73,106 $113,283
$84,701 $136,308
$98,347 $164,494
$114,413 $199,021
$133,334 $241,333
$155,620 $293,199
$181,871 $356,787
$212,793 $434,745
35
$60,462
$73,652
$90,320
$111,435
$138,237
$172,317
$215,711
$271,024
$341,590
$431,663
$546,681
$693,573
$881,170
40
$75,401
$95,026
$120,800
$154,762
$199,635
$259,057
$337,882
$442,593
$581,826
$767,091
$1,013,704
$1,342,025
$1,779,090
45
$92,720
$121,029
$159,700
$212,744
$285,749
$386,506
$525,859
$718,905
$986,639
$1,358,230
$1,874,165
$2,590,565
$3,585,128
(Assumes annual compounding of interest)
Use Table 3 above to answer these questions.
Question 8:
You save $1000 every year at a 10% return. Looking at the table, what amount will you have in 5
years?
Question 9:
You save $300 every year at a 5% return. How much money will you have in 45 years?
What Do You Have to Save Every Year to Achieve a Financial
Goal?
Let’s combine everything to determine what you need to set aside every year to reach your financial goals
in the future. Let’s say you need $50,000 to send your child or grandkid to college in 15 years. You expect
an 8% return. You can put $32,000 away right now but most of us don’t have $32,000 waiting to be
invested. Does that mean the child has no chance of going to college? You can put away $3700 every year
for the next 15 years and get to $100,000 just as well. The amount $3700 a year sounds feasible for two
people working and saving. Actually, saving every year works like a charm. Even the most insurmountable
goals (like $1 M for retirement) are pretty manageable if you save on an annual basis ($2600—for 45 years
at 8%).
For those of you who are mathematically inclined, here is the formula for figuring out how much you need
to save every year. Just remember, you don’t have to know the formula to calculate what you need to save
every year.
Using the table below, you can approximate what you need to save on an annual basis to reach a financial
goal in the future.
2009
16
Table 4
What Do You Have to Save Every Year to Achieve a Financial Goal in the Future?
(Savings per year to get $100,000 in the future)
Return
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
5
$18,835
$18,463
$18,097
$17,740
$17,389
$17,046
$16,709
$16,380
$16,057
$15,741
$15,431
$15,128
10
$8,723
$8,329
$7,950
$7,587
$7,238
$6,903
$6,582
$6,275
$5,980
$5,698
$5,429
$5,171
15
$5,377
$4,994
$4,634
$4,296
$3,979
$3,683
$3,406
$3,147
$2,907
$2,682
$2,474
$2,281
15%
$14,832
$4,925
$2,102
Number of Years
20
25
$3,722 $2,743
$3,358 $2,401
$3,024 $2,095
$2,718 $1,823
$2,439 $1,581
$2,185 $1,368
$1,955 $1,181
$1,746 $1,017
$1,558
$874
$1,388
$750
$1,235
$643
$1,099
$550
30
$2,102
$1,783
$1,505
$1,265
$1,059
$883
$734
$608
$502
$414
$341
$280
35
$1,654
$1,358
$1,107
$897
$723
$580
$464
$369
$293
$232
$183
$144
40
$1,326
$1,052
$828
$646
$501
$386
$296
$226
$172
$130
$99
$75
45
$1,079
$826
$626
$470
$350
$259
$190
$139
$101
$74
$53
$39
$976
$230
$113
$56
$28
$470
(Assumes annual compounding of interest)
Use Table 4 above to answer these questions:
Question 10
You are 25 years old and plan to retire at age 65 with $1 M. What will you have to save every year at
8% return if you start at age 45?
Question 11
What will you have to save every year at 8% return if you start at age 35?
Question 12
What will you have to save every year at 8% return if you start at age 25?
Planning For Uncertainty
Everyone knows that the better rate you invest at, the more money you will make. Investing at 10% is
always going to be better than investing at 8%. The trouble is most investors can’t predict with any certainty
what their future returns will be. Everyone knows the longer you keep your money invested, the more you
will have. Keeping money invested for 10 years is always better than 5 years. It’s just more time for the
compounding to take effect. Is this something you can control? Absolutely!
2009
17
Planning for the future is tough to do. It’s like trying to hit a moving target. Think of sending your kids to
college in 15 years. A college education costs about $50,000 now. What will it cost in 15 years? Inflation is
a factor in all financial plans.
For your children’s college education, if inflation is a low 5% a year for the next 15 years, that same college
education could end up costing $104,000. If you planned on $50,000, you’ll be $54,000 short when the bills
start rolling in. What can you do to avoid this? Apply an inflation rate to your financial goals.
The other big uncertainty is how much return you’ll get on your investments. If you use a return that’s
higher than what you actually get, you’ll end up short. In other words, if you save for 15 years based on a
10% return but get 8% instead, you’ll be $10,000 short of your goal.
Most financial planners use history as a guide when it comes to trying to figure out what returns will be in
the future. Based on history, your return will vary depending on what asset class you invest in.
Type of Investment
Large stocks (S&P 500)
Bonds
Savings interest (T-bill)
Past 40 Years
13%
8%
6%
Just remember, the lower the return you use (the more conservative you are), the more you will have to
save. However, you’re more likely to achieve your goal. If you want to make sure that you achieve your
goals, use a 6% return for your plan. The good news is, if you do get a better return, you’ll exceed your
goal and have money left over for other things.
Question 13:
You want to buy a house in 10 years that costs $200,000 today. You think inflation will be 3% over
the next 10 years. How much will the house cost?
Question 14:
You want to have a wedding that will cost $10,000 in 5 years. You think that you’ll invest in bonds at
8%. What is the annual savings you’ll need?
Question 15:
You want to save $75,000 for your kid’s college education in 20 years. You think that you’ll invest in
stocks at 8%. What is the annual savings you’ll need?
2009
18
Unit 1: Set Financial Goals
Any long-range plan or goal should have a road map or game plan—which is an outline of the actions needed
to reach a goal. Without goals, it’s difficult to accomplish anything. Have a plan for you and your money.
Summary for Financial Goals






Just as an athlete trains for a sport, it takes discipline, planning, and endurance to develop a personal
money management plan that can go the distance.
Once you develop the habits and patterns, it will be easier to stick to your plan.
Evaluate your values. Know what you will and will not give up to achieve your goals.
Make your goals Specific, Measurable, Attainable, Realistic, Time-bound
Set long-term and short-term financial goals
Start early and use the time value of money to achieve your personal goals.
Assessing Your Interests and Personal Values
Decisions about your future, career, and financial behaviors are all based on your personal view of the world.
Before you can make sound decisions about your future financial goals you should have a clear understanding
of your personal values. For the most part, you will have to make trade-offs based on your values.
A self-assessment answers the question, “Who am I?” It includes an assessment of your interests and values
to form a baseline of information about yourself before you begin to develop your financial goals and action
plans. This assessment activity will help you learn basic information about yourself to clarify your financial
goals and personal priorities.
Values are described as the principles which influence the most important aspects of your life. They affect your
actions, attitudes, and behaviors.
Values impact more than broad areas such as relationships, finances, health, educational pursuits, work and
aesthetics. They also influence the people you live with, where you live, and how you spend your free time.
Your choices are a reflection of your values.
This Values Auction activity will help you understand the impact of values on your financial choices by having
you rank what is most important to you and then see how much you are willing to “spend” to get it.
Values Auction
When setting financial goals we consider our values. A Values Auction will help us learn about our priorities
by:
 Planning how much will be spent on “items” on a list will help you think about what is important to you.
 Bidding on items using a set amount of (pretend) money will put you through the decision of making
choices.
 Winning a bid will let you know how it feels emotionally to get what you think you want.
2009
19
Auction Bidding Process
You have $100,000 to spend on the items. For the auction you must bid in increments of $100. You cannot
resell an item. Before the auction begins, fill in the left hand columns with the Spending Plan amounts you plan
to bid on the items that interest you. As the auction proceeds, fill in the appropriate amounts for each item. Of
course, the highest bidder “wins” the item.
When you are the highest bidder for an item, circle the item number and description for each item. Keep track
of how much money you actually “spend” during the auction and calculate how much you have left to spend on
the remaining items. If you don’t get an item, you can reallocate those funds as the auction is taking place.
You will have to think and act quickly!
Review the Values Auction items below to prioritize and assign Spending Plan bid amounts before the
Auction begins. See the Personal Money Management Workbook for the Values Auction and Writing
Assignment sheets.
Activity 1: Values Auction
Fill in the left hand columns of the Values Auction sheet below with the Spending Plan amounts you plan to bid
on the items that interest you.
My
Spending
Plan
Values Auction
($100,000 total Spending Plan)
1. Financial ability to provide for children or
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
$
Highest
Bid =
Sold
My
High Bid
$
$
My
$ Left
$
elderly parents.
Great musical talent
Three more good friends
World peace
A Ferrari (sporty car)
Tickets to any entertainment or athletic
event as often as you wish
Your student loan paid off in full
Beauty makeover including lifetime
wardrobe
Being able to retire securely
A satisfying and fulfilling relationship with a
lifetime partner
Lifelong financial security
A large and expensive house
Satisfying and fulfilling career
$50,000 for any charity you choose
Own your home, debt-free
Lifetime college education
Health insurance for life
A contract to play professional sports team
of your choice
Unlimited travel around the world
One hundred meals at the best restaurants
2009
20
Activity 2: Values Auction Reflection and Discussion
Answer as many questions as you can on separate paper, and then discuss what you learned.
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
What did you bid on? Why?
What did you buy? Why were you able to do so?
Did you get everything you planned for at the price you expected to pay?
Did anybody pay more than their spending plan? Why?
Did anybody get a bargain? Why?
On what did the group bid the highest? Why?
On what did the group bid the lowest? Why?
From this activity, what did you learn about your values?
From this activity, what did you learn about your priorities and spending plans?
How might this activity affect the setting of your financial goals in the future?
Needs vs. Wants
Can you differentiate between the things you truly need to accomplish your goals and the things you merely
want?
Multiple Choice Questions on Needs, Wants and Goals
Choose the best answer for the following three questions.
1. What are needs?
A. Things that are nice to have and gratify some desire or urge.
B. Necessities for your everyday living such as food, housing and books for school.
C. Desires and plans to achieve a specific outcome.
D. Something you think about but don’t accomplish.
2. What are wants?
A.
B.
C.
D.
Things that are nice to have and gratify some desire or urge.
Necessities for your everyday living such as food, housing and books for school.
Desires and plans to achieve a specific outcome.
Something you think about accomplishing but don’t.
3. What are goals?
A. Things that are nice to have and gratify some desire or urge.
B. Necessities for your everyday living such as food, housing and books for school.
C. Desires and plans to achieve a specific outcome.
D. Something you think about but don’t accomplish.
Your Needs include items that are necessary for survival, such as food, clothing, housing and medical care.
Your Wants are all the things you think you need, but can do without.
Identifying your needs and wants will help you plan for the future. The pressure to obtain present wants is
often greater than the willingness to provide for future needs. If you spend your money to satisfy wants before
your needs are met, you will probably experience financial difficulties.
2009
21
Activity 3: Needs and Wants
On a sheet of paper, identify and write down 10 of your recent purchases.
 Put an N next to the purchases you felt were essential and important to you.
 Put a W next to the purchases that were not essential, but things you wanted to have.
 Compare the number of N’s and W’s.
 Did you spend more money on needs or on wants?
 How many of your needs might be considered wants?
 How much of your spending was a function of “retail therapy” (spending money because it makes you
feel good)?
 What did you learn about your needs and wants from this activity?
Set Goals
According to The Facts about Saving and Investing (1999) put out by the Securities Exchange Commission,
two out of three of all US families fail to reach one major financial goal. It’s important that you write down your
financial goals and work on them.
The first important step in your strategy to become financially secure is to have goals. When we don’t have
goals we drift and at the end of our work lives, we wonder why we didn’t do what we wanted. When we have
goals, we achieve them.
Use the SMART approach to set realistic goals
Identify financial or saving goals that excite you, such as saving to buy a car; staying home with the kids;
leaving an awful job; paying off your mortgage; starting your own business; traveling with your family or
friends, helping others, etc. The following advice will help you write a SMART goal.
Specific. Smart goals are specific enough to suggest action.
“Save money for a used car.”
Measurable. Goals need to be measurable when you’ve reached your goal.
“This used car will cost $8000 so I need to save $1,000 for a down payment.”
Attainable. Goals need to be reasonable.
“$8000 for a used car (versus $20,000 for a new car) is reasonable for my circumstances.”
Realistic. The goals need to make sense.
“I make $30,000 a year so buying a used car makes sense and saving $84 a month for $1000 is
realistic with my income.
Time-related. Set a definite target date.
“I can save $84 per month and reach $1000 within 12 months.”
2009
22
Lay out your lifetime financial goals. That’s right—for your whole life. This is tough because we tend to have
short-term horizons. However, you need to think about all your goals now because some of them will take a
long time to achieve. The following chart shows how your income will change over your life. It also outlines the
major financial goals that you’ll have at every phase of your life.
Education
Education is a big ticket item with students paying on average $10,000 a year in tuition plus $10,000 in living
expenses to go to Washington state’s public four-year universities. Community colleges cost $4000 a year. A
college education seems to be a necessity in this new global age where higher skill sets are necessary. With
this large cost, often even grandparents must chip in along with parents to ensure that the kids in the family
have a chance to get a college education. This can cost you $25,000 to $100,000 per child for four years of
college.
First House
The first major financial goal for young adults starting out is saving for a house. If you’re living in a typical
Washington State city, house prices start at $200,000 or more, with a $40,000 (or more) down payment. Keep
in mind that these prices vary greatly depending on where you live.
Retirement
Most of you are going to live longer than the current life expectancy (about 78 years) because of
developments that are prolonging life. This means that you will have to ensure that you have enough money
for a lengthy retirement. If you think Social Security will take care of your lengthening requirements, you might
want to think again. Social Security currently gives you a minimum wage (the average payment as of 2006 is
$955 a month and the maximum is $1500). It covers about 42% of retired people’s needs if they made
$15,000 before they retired. If they made $60,000, Social Security covers 25% of their needs. Right now
workers are putting more into the social security than retirees are taking out. But that is expected to change by
2040. At that time, according to the Social Security Administration, people who retire will receive only 75% of
the current entitlement.
Although you think that people reduce spending when they retire, most keep their level of spending up. Many
people keep their homes (and all the expenses that come with them) when they retire. When you get older,
some expenses get bigger. Your medical costs increase. Medicare takes care of 54% of your needs, but you
must pay extra for doctor’ visits. If you need long-term care such as a nursing home, you have to pay the bill
yourself.
Currently, most people are resigned to the fact that employers will no longer take care of you when you retire.
Most people don’t work long enough at any company to even qualify for the traditional pension plans.
2009
23
Employers are slowly phasing out traditional pension plans and phasing in retirement savings plans that
require you to save and invest for yourself. Employers believe that these types of plans match what workers
do. Most workers don’t stay the 5 years necessary to get any benefits, let alone the 30 years it takes to get
adequate benefits. When these workers leave, they can take their retirement accounts with them.
Although many people know that retirement savings plans such as 401Ks will be their main source of
retirement income, about 18% don’t contribute at all. When people leave their companies, over half of them
cash out their retirement savings instead of rolling them over to other retirement plans. Younger people tend to
do this most and they are the most hurt by the cash out. Even small amounts set aside early in your working
life can work hard for you over time. If you’re cashing out, most of the benefits of compounding are lost.
The experts don’t always agree on the amount you need for retirement because there’s so much uncertainty
involved in the amount of social security and your longevity not to mention inflation rates and rates of return.
It’s estimated that baby boomers (who are retiring now) have about one third of what they need to retire.
As a rule of thumb and assuming that you have no other sources of income, you can estimate the income level
for the lifestyle you want to live and divide by 4% to come up with a retirement savings goal. For example, if
you want a $50,000 lifestyle, divide by 4% to get $1 million.
Other Goals
Maybe you have other goals, like starting your own business (Jeff Bezos used $60,000 of his own money to
start Amazon.com). Lay your goals out and put a price on them. According to the 2004 Consumer Finance
Survey, here are the top reasons people save:
Goal
Retirement
Liquidity
Percent of People Saving
34.7
30
Education
11.60
Purchases
7.7
Buying own home
5
For the family
4.7
Investment
1.5
Once you've got your goals list, check it every year. Your needs may change. Tax time is a good time since
you’re looking at your finances anyway. Your tax return will tell you how much you earned and you should
figure out how much you spent. Did you save enough for the year? Check out your goals. Do you have
additional goals now? (A life event marriage, having children-- tends to change your financial goals.)
In addition to using the SMART approach you should:






2009
Keep away from New Year’s-type resolutions. Set personal goals according to your internal timetable.
Avoid general goals such as “save money” or “invest better.” Redefine them or toss them.
Be specific. The more specific you are, the greater possibility you’ll succeed.
Break goals into small segments. Try breaking your goals into smaller terms, such as “Save $5 a day”
rather than “Save more money.”
Develop an action plan. What do I need to do to achieve this goal? If the goal is to “Save $5 a day,”
the action is to give up a purchased soda or snack in order to save the $5.
Focus on a few, key goals to realistically achieve success. Don’t include too many.
Be flexible – Your life circumstances will change. You may marry, have children or become ill. You
need to alter your plans, if necessary.
24
Question 6
When you retire, Medicare takes care of what portion of your medical expenses when you retire?
A. One quarter
B. One half
C. Three quarters
Question 7
When you retire, Social Security benefits can cover what portion of your living expenses?
A. One quarter
B. One half
C. Three quarters
Question 8
Your life expectancy when you reach age 65 is?
A. 13 years
B. 18 years
C. 23 years
Activity 4: Check Out Your House Value (or Other Houses)
Although these house value sites are not totally accurate, check out www.zillow.com which shows the price of
a house in a neighborhood that you to live in or want to live in. How much will you have to pay for the house?
Activity 5: Estimate How Much You Will Need When You Retire?
Estimate how much you will need when you retire. Use a simple rule of thumb. Most people will take out
4% of their retirement fund for annual living expenses. Decide what level of lifestyle you want when you retire
(e.g. $40,000, $60,000, etc.) and divide by 4%.Set realistic goals using the SMART approach:
Activity 6: Identify What You Want to Achieve Financially This Year?
Write your responses to these questions on separate paper.
A. Over the next year, what ONE occurrence would have to happen for you to feel you’ve made significant
financial progress? _______________________________________________________________
B. Write this occurrence as a goal. _____________________________________________________
C. Describe why it is important to you.___________________________________________________
D. Describe how you will feel when you have accomplished this goal.
_____________________________________________________________________________
2009
25
Activity 7: Identify and Prioritize Personal Financial Goals
Personal Financial Goals Worksheet
Name(s): _________________________
Date:
_________________________
 Short-Term: such as paying off credit card debt, saving for
a vacation.
 Long-Term: such as saving for a home down payment,
college education, retirement.
Priority
You may not be able to do everything immediately, but you do
need to get started! Take it one step at a time. Do not
procrastinate.
Brief Description
Actions to Be Taken
Target Date
for Completion
Example: Lose weight – 10 pounds
Eat less and exercise more
Six months
Short-Term Money Goals (3-12 months) _____________
Brief Description
Actions to Be
Taken
Example: save for emergency-health,
car, etc; college tuition, books; a
regular savings/investment program
Set up automatic
monthly transfer
from checking
Target
Date for
Completion
Cost
Estimate
Savings
Needed Per
Month
3 months
$1,200
$400
Long-Term Money Goals (One year or more)_________
Priority
Review your financial goals.
 Narrow your goals. You probably won’t be able to
accomplish every financial goal, so decide which are most
important to you.
 Be ready for conflicting goals. Determine which of the
conflicting goals will benefit more people than the other.
 If you have more than one goal in any goal section,
prioritize these goals by writing 1, 2, 3, etc. with 1 as the
most important.
Goals for: saving, spending and credit
Year:__________
Months _________
Non-monetary Goals
Priority
Complete the Personal Financial Goals Worksheet in the
Personal Money Management Workbook with at least one goal
in each category to help you focus on your most important goals.
Estimate the cost and date you want to achieve each goal. Then
fill in more goals at home as part of this week’s assignment.
Brief Description
Example: Save for a wedding, a home
by age 30-- down payment, a baby,
for retirement, other. . .
Actions to Be
Taken
Increase contribution
to savings program
by 10% per year
Target
Date for
Completion
Cost
Estimate
Savings
Needed Per
Month
Four years . .
$15,000
$313
www.bellevuecollege.edu/financialeducation
Online Resources:
Following is a list of great websites with more information on financial goal setting:
Bankrate.com has news, advice, and rate comparisons on mortgages, home equity loans, auto loans, CDs
and investments, credit cards, college finance, insurance, and taxes: www.bankrate.com
CNN Money’s Money 101 program has 23 lessons on money management, other financial education
information and calculators: http://money.cnn.com/magazines/moneymag/money101/index.html
Federal Reserve Bank has consumer information about money management, budgeting, saving, investing
and credit: http://www.federalreserve.gov/consumers.htm
For education, check out the College Board for costs of the college you want to go to:
http://www.collegeboard.com/student/pay/add-it-up/482.html
For home, look at the http://seattletimes.nwsource.com/html/homevalues2007/. Classify your goals as long
term, intermediate term and short term.
National Endowment of Financial Education has information about financial planning, credit and debt,
saving, investing, retirement plus Life Events and Financial Decisions: www.smartaboutmoney.org
Personal finance advanced tools: Determine the inflated value of each financial goal-what you would have
to save. Use savings calculators on Lum web book on Personal Investing,
http://facweb.bcc.ctc.edu/llum/Personal%20Investing%20Book/index.htm
Young Money has calculators for savings, retirement, personal finance, loan and mortgage, credit card
and debt management, and auto buying: http://www.youngmoney.com/calculators
2009
26
Unit 2: Develop a Spending Plan to Invest in Your
Future
Benefits of a Spending Plan
A spending plan is a planning tool to help you manage your money. A spending plan helps you identify your
personal financial goals, analyze what income you have available, know what you are spending money on,
and develop steps to achieve your personal financial goals.
A spending plan help you:
 Achieve financial goals and dreams. It does not have to be a penny-pinching sacrifice. A spending plan
can help develop personal wealth.
 Keep a positive attitude about personal finances. You can achieve true financial freedom.
 Save for those important things: new car, college education, wedding, new house, comfortable
retirement, or travel.
 Lower stress level, because you're organized. You are more financially secure and happy.
 Overcome spending urges and splurging. No more guilty feelings about spending. Living within a
spending plan increases your self-worth. There are fewer reasons to argue with family members, so
personal relationships improve.
 Eliminate unnecessary debt. You can improve your credit score by paying on time and according to the
Spending Plan. No more expensive late payment fees. You may receive better credit interest rates.
Look where Americans spend their money according to the Bureau of Labor Table of 2004 Expenses
by Family Size.
One person
Expenditures Total (In dollars)
Two person
Three person Four person Five or more
$23,507
$40,359
$45,508
$54,395
$53,805
Food at home
1,533
2,954
3,696
4,404
5,151
Food away from home
1,302
2,336
2,512
3,043
3,042
Alcoholic beverages
Housing
Apparel
314
400
315
368
309
8,371
12,944
14,744
17,914
17,317
862
1,650
2,013
2,643
2,893
Transportation
4,012
7,692
9,348
10,775
11,123
Healthcare
1,441
2,827
2,265
2,253
2,150
Entertainment
1,097
2,051
2,137
2,787
2,718
Personal
297
512
555
614
658
Reading
111
168
139
155
131
Education
423
476
830
1,059
984
Tobacco
203
312
397
349
416
Miscellaneous
518
744
843
1,156
743
Cash contributions
1,063
1,429
1,167
1,287
1,399
Personal insurance and pensions
1,960
3,864
4,547
5,589
4,770
Personal Taxes
1,829
3,599
3,066
3,900
2,652
Source: 2004 Consumer Expenditure Survey, Bureau of Labor Statistics
Remember: No matter how much money you make, it will never “be enough” if you don’t
control your spending.
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Identify Income and Expenses - Calculate Your Spending Plan
A spending plan (budget) worksheet allows you to see how much you have and where it goes.
A sample Spending Plan Worksheet with all income and expense sections is
pictured on this page and in the Personal Money Management Workbook.
The Spending Plan Worksheet will be divided into sections for income and
expense categories to make it easy to complete the information.
Collect your pay stubs, household and other bills, expense receipts, checkbook or
online checking data, checking and credit card statements.
Spending Plan Worksheet
Name
Month:
Date:
Planned
Amount
Category
Actual
Amount
Income
Net pay-Job 1
Net Pay-Job 2 or Child Support, Alimony
Investments/interest/dividends
Sort the receipts by categories and sections listed on the Spending Plan
Worksheet. The sections are: Income, Fixed Expenses, Variable Expenses
Discretionary Expenses and Adjustments to Spending Plan.
Total the dollar amounts in each of these categories for one month. Don't forget
to record your cash expenditures and online transactions.
Student loans, grants
Other Income (birthday money, money from Mom or Dad)
Other Income: (Tips, contractor set aside $ for Income Tax)
INCOME Subtotal
$
$
Total Fixed Expenses $
$
Fixed or Routine Expenses
Rent or Mortgage
Savings – Emergency
Savings and Investment for long-term goals
Look to see where your cash goes, especially if you make frequent ATM
withdrawals from your bank accounts.
Util ties(Water/Garbage)
Insurance (health, life, auto, home/renter)
Car payments
Student Loan payments
Other
Steps to Creating a Spending Plan
To make it easier to create a spending plan that will work for you, a 4-step
process will be used to develop each section of the Spending Plan Worksheet.
1.
2.
3.
4.
Calculate your monthly income
Calculate fixed, variable and discretionary expenses
Calculate Net Income (Monthly Income minus Total Expenses)
Analyze Expenses and Make Spending Plan Adjustments
A. Identify your debts to pay down
B. Debt reduction plan
Variable Expenses
Groceries
Util ties (gas or electricity)
Transportation (gas, maintenance, parking & buses)
Child Care payments
Phones - home & cell
Medications, Medical, Dental, Vision
Credit Card payments
Education (tuition, books, etc.)
Personal care (haircuts)
Other
Total Variable Expenses $
$
Discretionary Expenses
Meals out (food & beverages)
Cable TV/ Internet Service Provider
Donations (church, charities, etc.)
Clothing (Purchases, laundry)
Personal care (manicures,gym, tanning, etc.)
Entertainment (Movies, drinks,vacation, sport teams,
sporting events, concerts, etc.)
Household (furniture, tools, curtains, pictures, etc.)
Gifts (Birthdays, Holidays, Weddings, etc.)
Books/Magazines/Newspapers
Other
Total Discretionary Expenses $
EXPENSES Subtotal
2009
$
$
$
28
Step One: Calculate Monthly Income
What is Income? Income is what you take in every month from your job and other sources such as:
 Self-employment earnings, tips
 Child support or alimony
 Assistance payments and social security payments
 Interest/dividends
 Student loans, grants
 Monetary gifts
Activity 8: Spending Plan Worksheet – Income Section
Fill in your information on the Spending Plan Worksheet- Income Section in the Personal Money
Management Workbook.
Spending Plan Worksheet -- Income Section
Name:
Month:
Category
Monthly
Actual Amount
Date:
Monthly
Spending Plan
Amount
Income
Net pay - Job 1
Net Pay - Job 2 or Child Support, Alimony
Investments/interest/dividends
Student Loans, Grants
Other Income (birthday money,
money from Mom or Dad)
Other Net Income (If you are paid as a “non-employee”
or “Independent Contractor” set aside $ for Income
Tax.)
Other Income
Income Total
2009
$
29
Step Two: Calculate Fixed, Variable, and Discretionary Expenses
Expenses can be categorized as the following:
 Fixed Expenses - costs that occur regularly and the amount generally doesn’t vary.
 Variable Expenses - costs that occur regularly and the amount does vary.
 Discretionary Expenses - costs determined by personal wants that may be controlled.
Fixed Expenses or Routine Payments are payments with the same amount made every month. Often these
are expenses that you are committed to paying and can’t be changed.
 Mortgage or rent payment
 Automatic savings for emergency savings (3-6 months of living expenses) and savings/investment for
long-term goals, such as vacation, car, college, wedding, house, and retirement
 Car loan payment/bus pass
 Insurance payments (Calculate the amount needed to meet premium intervals.)
 Utilities –fixed payments each month, such as water, garbage, etc. (You can have the utility companies
average your bill so it is a constant amount every month.)
 Education loans
 Others?
Remember, pay yourself first. Use automatic savings--set up transfer or deposit from each pay check (with
employer or bank) to build up your savings and investments.
Activity 9: Calculate Your Fixed Expenses
Fill in your information on the Spending Plan Worksheet-Fixed Expenses Section in the Personal Money
Management Workbook.
Spending Plan Worksheet -- Fixed Expenses Section
Name:
Month:
Category
Monthly
Actual Amount
Date:
Monthly
Spending Plan
Amount
Fixed or Routine Expenses
Rent or Mortgage
Savings – Emergency
Savings and Investment for long-term goals
Utilities(Water/Garbage)
Insurance (health, life, auto, home/renter)
Car payments/buss pass
Student Loan payments
Other
Total Fixed Expenses
2009
30
Variable Expenses are payments you make in which the payment amount varies. Sometimes you can control
the amount of these expenses by reducing your usage.
 Electricity, natural gas
 Telephone, cell phone
 Gas for autos
 Groceries
 Credit card payments
 Others?
Activity 10: Calculate Your Variable Expenses
Fill in your information on the Spending Plan Worksheet-Variable Expenses in the Personal Money
Management Workbook.
Spending Plan Worksheet -- Variable Expenses Section
Name:
Month:
Category
Monthly
Actual Amount
Date:
Monthly
Spending Plan Amount
Variable Expenses
Groceries
Utilities (gas or electricity)
Transportation (gas, maintenance, parking & buses)
Child Care payments
Phones - home & cell
Medications, Medical, Dental, Vision
Credit Card payments
Education (tuition, books, etc.)
Personal care (haircut)
Other
Total Variable Expenses
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31
Discretionary Expenses are optional expenses that we choose to pay but are generally not required. They
tend to be wants rather than needs.






Movies, videos, CDs
Sports, concerts, other entertainment
Dining out (lattes, pop, snacks, meals, etc.)
Personal care (manicures, gym, tanning, etc.)
Clothes
Others?
Note: Discretionary Expenses are
areas in which you can cut back
to save money!
Activity 11: Calculate Your Discretionary Expenses
Fill in your information on the Spending Plan Worksheet -Discretionary Expenses Section in the Personal
Money Management Workbook.
Spending Plan Worksheet -- Discretionary Expenses Section
Name:
Month:
Category
Monthly
Actual Amount
Date:
Monthly
Spending Plan
Amount
Discretionary Expenses
Meals out (food & beverages)
Cable TV/ Internet Service Provider
Donations (church, charities, etc.)
Clothing (purchases, laundry)
Personal care (manicures, gym, tanning, etc.)
Entertainment (Movies, drinks, vacation, sport teams,
sporting events, concerts, etc.)
Household (furniture, tools, pictures, etc.)
Gifts (Birthdays, Holidays, Weddings, etc.)
Books/Magazines/Newspapers
Other
Total Discretionary Expenses
2009
32
Step Three: Calculate Net Income
List the subtotal of Income and subtotal of the Expense categories on this Worksheet. Subtract the Expenses
subtotal from the Income subtotal to arrive at your Net Income or Discretionary Income (Income Surplus or
Deficit).
Activity 12: Calculate Your Net Income
Fill in the Subtotals from the Income and Expense categories in the Net Income Section. These forms are
found in the Personal Money Management Workbook.
Spending Plan Worksheet -- Net Income Section
Name:
Month:
Category
Monthly
Actual Amount
Date:
%
Monthly
Spending Plan
Amount
%
$
INCOME Total
Fixed Expenses
Variable Expenses
Discretionary Expenses
EXPENSES Total
$
NET INCOME (Surplus or Deficit) =
(Income minus Expenses)
$
If your Net Income is positive, then transfer surplus Net Income to a savings or investment account.
If your Expenses are greater than your income:
 Determine where overspending occurs—cut or reduce your expenses.
 Identify where you can save money.
 Postpone some expenses.
 Increase your income.
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33
Activity 13: Calculate Expense Percentage of Total Expense
Calculate the percentage that each expense category is of the Total Expense in the columns above.
Expense category / Total Expense = Percentage of Total Expense of Each Expense Financial
experts suggest the following percentages for Spending Plan expenses:
Savings: 5-10%
Food: 12-20%
Transportation: 7-10%
Medical: 3-5%
* Life/Car Insurance: 4-6%
Housing: 23-33%
Personal Debt repayment: 818%
Charities churches, etc: 5-10%
Clothing: 4-7%
Entertainment/Recreation: 4-6%
Remember the following when comparing expense percentages with others:
No two families are alike. Spending varies by income level. Costs vary widely by region and
by family size.
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Step Four: Analyze Expenses and Make Spending Plan Adjustments
Examine expenses to evaluate whether the expense items are Needs or Wants. Reduce or eliminate spending
on “Wants” expenses to conserve wealth for your financial goals.
Needs are essentials:
 Food
 Shelter
 Clothing
 Transportation
 Others?
Wants are extras:
 Eating out often
 Big, expensive house
 Lots of shopping
 Brand-new or expensive car
 Others?
Activity 14: Identify Spending Plan Adjustments
Fill in the Spending Plan Adjustment Worksheet in the Personal Money Management Workbook to see where
you can save. Identify where you can make adjustments to reduce expenses and start saving money.
Spending Plan Adjustment Worksheet
Expenses
Amount
Beverages (pop, coffee, etc.)
Average
Amount
per Month
Average
Amount
per Year
$
Cell phone roaming charges,
text messaging, downloads
Entertainment (movies, concerts, alcohol)
Eating out
Total
$
To Do: Go back to the Spending Plan Worksheet Expenses sections. Reduce the amount in the Expense
category that you listed above. This will reduce your Monthly Spending Plan amount and conserve wealth.
2009
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Identify Your Debts to Pay Down
Activity 15: Identify Debts to Pay Down
To help you get a handle on how much you owe—and to whom—here's a handy worksheet to plan how to pay
off these debts.
Debt Identification Worksheet
Debt owed
Taxes
$ Amount owed
Owed to whom?
Alimony
(federal and/
or state)
ex-spouse
Child support
ex-spouse
Action taken
Credit cards
Credit cards
Credit cards
Personal loan
(such as a car)
Personal loan
(other)
businesses
Personal loan
family members
Personal loan
friends
Back rent/ mortgage
Other debts
2009
36
Debt Reduction Action
There are times when your debt is more than your income. In order to pay down, reduce and eliminate debt, a
Debt Reduction Worksheet is a valuable debt reduction planning tool.
Activity 16: Develop a Debt Reduction Plan
Make several copies of this worksheet—one for each company or credit card company to which you owe
money. Then, list the interest rate, how much money you owe to each creditor, and how much you will pay off
each month.
Using a Debt Reduction Plan you will soon see the amount you owe decrease, as you make steady payments.
It will shrink even faster if you pay something extra whenever you can.
 Put your worksheets in order with the highest interest rate first. You will pay down your debts faster and
reduce your interest charges, if you pay more on the debt with the highest interest first.
 Or you can pay the creditor with the smallest balances first to get rid of them and see progress in reducing
the number of creditors you owe. This is like a stair-step to financial success.
When you've paid off one debt, congratulations! Celebrate your progress, and then start using that money to
pay off another debt.
Interest Rate and Debt Payment Worksheet
Creditor:
Interest rate
2009
Debt is for:
Amount owed
Monthly payment
Payment
due date
Amount paid
and date
37
Other Spending Plan Tools
The following Spending Plan tools can be used at home. These tools are from “Money Matters,” Money
Smart, Federal Deposit Insurance Corporation, September, 2006. Use the one you are most comfortable with.
Expense Envelope System
The envelope system is useful if you pay your bills in cash each month.
 Make an envelope for each expense category, such as rent, gas, electricity, and food.
 Label the envelope with the name of the category, the amount, and the due date.
 When you receive income, divide it into amounts to cover the expenses listed on the envelopes.
 Pay bills right away so you won’t be tempted to spend the money on something else.
Spending Plan Box System
The Spending Plan box system is a small box with dividers for each day of the month.
 When you receive a bill, check the due date and place it behind the divider with the bill’s due date.
 As you receive income, pay all bills that are due.
Computer System
If you have access to a personal computer, you can create your own spreadsheet. Many credit card and banks
have online records of all your transactions. You may also want to purchase a personal finance program. They
are available for less than $75. Using a computer to manage your finances is relatively simple. Once you set
up the system, updating information is quick and easy. It is important to enter transactions frequently to truly
understand your financial position.
Success Tips for Using a Spending Plan
 Pay yourself first. Use automatic deposit or automatic transfer from checking to savings.
 Get everyone involved—spouse, kids, other family members.
 Find ways to have fun for free. (Free concerts, free classes, festivals, art shows.)
 Stay in control—make it part of your daily routine.
 Begin your spending plan at the beginning of the year and review every three months.
 Use the “Level payment-budget plan” to pay your utilities.
 Reduce spending on wants—focus spending on needs. Evaluate expenses that are wants (e.g. designer
purse) and expenses that are needs.
 Consider shopping at garage sales and thrift shops.
 Pay with debit card or cash but make sure that you have money in your bank account--stay away from
using credit cards to pay for everyday expenses. When you’re using credit cards it can seem like you are
spending less, but your credit card debt will increase rapidly, adding to financial problems.
 Enter each check you use to a check register and balance every month. Check your on-line bank account
weekly to make sure you haven’t forgotten to enter a transaction.
Source:360° of Financial Literacy, American Institute of Certified Public Accountants,
http://www.360financialliteracy.org/
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Summary—Creating a Spending Plan:










List all your income.
Accumulate all your expenses (receipts, credit card bills, checking account register, etc.)
Categorize it as fixed, variable and discretionary. Don’t forget to pay yourself first by saving 10% of
your income.
Create a debt reduction plan.
Consolidate all these into an annual spending plan.
Compare your spending to that recommended by experts.
Adjust your spending plan so you can meet your saving goals.
Live by your spending plan for 3 months and then adjust.
Check your spending plan at the end of the year. Did you meet your savings goal?
Keep at it. It’s a marathon not a sprint.
ACT- Implement Your Plan—Assess--Adjust.
Once you have set goals, estimated your fixed, variable and discretionary expenses and identified monthly
savings targets, it's time to put your plan to work. Give it some time. Then see how you're doing. Were you
able to meet your savings goals? If so, stick with it. If not, look at your variable expenses for opportunity areas
to cut back spending and increase savings.

Action Checklist
1. Establish goals (where you want to be).
2. Determine your current situation (Net Worth and Spending
plan).
Goals
Spending Plan
3. Save your way to a more secure future
4. Spend sensibly—spend less than you make; pay wisely
5. Implement your spending plan, assess and adjust
Save
Conserve
Act
Online Resources
The Federal Deposit Insurance Corporation has helpful consumer information links on personal finance,
Money Smart education program and Identity Theft in Quick Links for Consumers & Communities.
http://www.fdic.gov/quicklinks/consumers.html
The Federal Reserve Bank has consumer information about money management, Spending Plan, saving,
investing and credit: http://www.federalreserve.gov/consumers.htm
Personal Finance links to Spending Plans and Saving information from the Chicago Federal Reserve Bank
at: http://www.chicagofed.org/consumer_information/budgeting_and_saving.cfm
MyMoney.gov is the U.S. government's website dedicated to teaching all Americans the basics about
financial education, buying a home, balancing your checkbook, or investing in your 401k. Information from 20
federal agencies governmentwide. http://www.mymoney.gov/
MsMoney.com has created a website to assist others in personal finance with finance, career and life
planning. http://www.msmoney.com "MsMoney.com does a good job of disseminating financial info without
being glib or too elementary." A Business Week review states: "We especially liked the online seminar at
MsMoney.com. The written material is very detailed and the calculators, quizzes, and other interactive features
add a lot of value.”
See great articles on Oprah’s “Money” page, including Oprah’s Debt Diet:
http://www.oprah.com/money/money_landing.jhtml
The Hartford’s Playbook for Life has information about a student athlete’s guide to understanding and planning
a financial future, plus insurance and investment information. www.playbook.thehartford.com
2009
39
Best-selling author Suze Orman, has a site full of information on money management: www.suzeorman.com
2009
40
Unit 3: Evaluate ATM/Debit/Check Cards and Credit
Cards
Electronic Funds Transfer
Electronic funds transfer is a national payment mechanism that moves money between accounts in a fast,
paperless way. Banks and financial institutions like electronic transfer of funds because it can save them
significant money. A check costs about $3 to process while an electronic transfer costs about $1.50 or half as
much. Examples of electronic funds transfer (EFT) systems in operation today are:
Automated Teller Machines (ATMs). Consumers can do their banking without the assistance of a teller. They
can get cash, make deposits, pay bills, or transfer funds from one account to another electronically. These
machines are used with a debit or ATM card (sometimes referred to as check cards) and a code, which is
often called a personal identification number or “PIN.”
Retail Store or Point-of-Sale (POS) Transactions. Some debit or ATM cards can be used when
Frequency of use per week
shopping to allow the transfer of funds from the consumer’s
account to the merchant’s. To pay for a purchase, say at a
supermarket, the consumer presents an ATM card instead
of a check or cash. Money is taken out of the consumer’s
account and put into the merchant’s account electronically.
Preauthorized Transfers. This is a method of
Source: The Federal Reserve Board
automatically depositing to or withdrawing funds from an
individual’s account, when you authorize the bank to do so.
For example, people can authorize direct electronic deposit
of wages, social security, or dividend payments to their
accounts. They can authorize payments into retirement
accounts or they can authorize financial institutions to make
regular, ongoing payments of insurance, mortgage, utility,
or other bills.
Check Card Survey 2007
Telephone Transfers. Consumers can transfer funds from
one account to another— from savings to checking, for example—or order payment of specific bills by phone.
With electronic transfers, you can get a written receipt, much like a sales receipt you get with a cash purchase,
showing the amount of the transfer, the date it was made, and other information. This receipt is your record of
the transactions. If you bank online, be sure to note the confirmation number of any payments you make. Not
paying a bill on time can cause you to incur late payment and other charges.
Your monthly bank statement will also show electronic transfers to and from your account, including those
made with debit cards, by a preauthorized arrangement, or under a telephone transfer plan. The statement will
also name the party to whom payment has been made and show any fees for EFT services (or the total
amount charged for account maintenance) and your opening and closing balances.
Substitute Checks
Under a new law called “Check 21”, your paper check can be replaced with a paperless copy called “substitute
checks.” Substitute checks should state: “This is a legal copy of your check. You can use it the same way
you would use the original check.” You can use a substitute check as proof of payment. Check 21 has special
refund procedures if you suffer a loss related to a substitute check you receive and certain protections against
wrong and unauthorized check payments. Be sure you write legibly, keep timely, accurate records and
promptly notify your bank or credit union of errors.
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Substitute checks are be processed electronically. This means that your check will be deducted from your
checking account faster. So if you write a check today, you need to have the funds in your account today to
cover it. If you have insufficient funds in your checking account, your bank or credit union may return it as a
“bounced check” and charge you a fee. Bounced checks can blemish your credit record.
Electronic Check Conversion
Substitute checks and electronic check conversion are different. Both are processed electronically but the
processes are different.
A typical example of an electronic check conversion happens with a merchant. You give your check to a store
clerk who runs it through a machine that immediately converts the information into electronic data and sends
the data to your bank or credit union. Your check should be handed back to you as voided or marked in a way
so the check can’t be used again. Another example is when you mail a check for a purchase or pay on an
account. The merchant or company may convert it from a paper check to an electronic check and then
destroy or mark the paper check copy as converted to electronic check. You may not know which merchants
or companies will convert your paper check to an electronic check, so be sure you have funds in your checking
account to cover the check on the same day that you send your payment.
Electronic check conversion is an electronic fund transfer. The processed information will appear on your bank
statement in an area with similar payments, like direct deposit of your paycheck, or debit card payments and
withdrawals. Electronic check conversion has special protections for errors and unauthorized transfers under
the Federal Electronic Fund Transfer Act.
ATM Cards, Debit Cards and Check Cards
An ATM card (also called a debit card or check card) allows you to take money out of your checking
account from the cash machine or purchases in stores—without writing a check or using a teller machine.
ATMs provide convenience with a price tag. You will pay a fee for using an ATM that does not belong to your
bank or credit union. Your bank and the bank that owns the ATM may each charge you an ATM fee, $1-4, for
using it. A debit or check card allows you to make purchases and pay for bills from your checking account.
Unlike a credit card, where you pay for your purchases once a month when you receive a statement,
purchases paid for with an ATM/debit/check cards are deducted usually the same day as the purchase from
your checking account. This deduction from your checking account can trigger Non-Sufficient Funds or
overdraft fees if the money is not in the account when the deduction goes through. This relatively fast
deduction of funds may also make the return of merchandise more difficult.
Evaluating Debit Cards
There may be fees for using your debit card. For example, some banks or credit unions charge a fee if you
enter a PIN (Personal Identification Number) to conduct a transaction instead of signing your name. You may
trigger a fee if you overdraw your account using your debit card, just as you would if you "bounced" a check.
Or, there could be a charge if you use your debit card as an ATM card at a machine that is not operated by
your financial institution. As with other bank products, your financial institution must provide disclosures
explaining the possible fees associated with a debit card. Be sure to read the disclosures to avoid an
unexpected fee.
As with similar financial products, rewards-linked debit cards are designed to encourage people to use a
certain bank and its services. Before opening a new account or changing financial institutions just to get a
different perk, study the fine print. Start by reading the disclosures that explain the account terms and fees to
understand the potential benefits as well as the costs.
The payments are electronic and are deducted from accounts more quickly than when using a paper check.
Often, a debit card purchase is posted within 24 hours instead of days, as may be the case with a paper
check. That means there would be little time to make a deposit to cover a purchase, if necessary. In addition,
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even though a transaction was approved, you may overdraw your account because the bank won't know what
other withdrawals you have made that day until it settles all transactions later that day.
In certain circumstances with debit cards, merchants can take these steps as protection against fraud, errors
or other losses. One common situation involves a hotel putting a hold on a certain amount when you use a
debit card (or credit card) to reserve a room. Another example is when you use your debit card at the gas
pump. Typically, the gas station will create two transactions — the first to get approval from your bank or credit
union for an estimated purchase amount (let's say $90) when you swipe your card before pumping gas, the
second for the actual charges when you're done. Until the first ($90) transaction is cancelled by the bank or
credit union, usually within 48 hours, you wouldn't have access to that amount in your account.
Because funds are deducted from your account very quickly, don't expect to have the option to stop payment
or obtain a refund. If the transaction cannot be cancelled, you may be able to work out other arrangements
with the store such as a store credit or a gift card. If you are concerned about that the merchant may not
deliver as promised, consider using a credit card. Consumer protections are stronger for returning
merchandise with credit cards. The Fair Credit Billing Act, which applies to credit cards but not debit cards,
gives you the ability, under certain circumstances, to withhold payment on defective goods until the problem
has been corrected.
Sometimes you're asked to enter a PIN to approve a debit card transaction, other times you can sign your
name. If you use a PIN at a merchant's sales counter, you also may be able to get cash back, and that can
save you a trip to the ATM. However, be aware that some financial institutions charge consumers a fee for a
PIN-based transaction. There also may be differences in how quickly the transaction is posted to your account,
depending on how your bank processes PIN vs. signature debits.
Debit cards are frequently used for foreign travel as their fees can be less than for credit cards. Typically you
have to notify the bank or credit union that you will be traveling abroad. Otherwise, you risk a chance the bank
or credit union may reject your foreign transactions or close your account under automatic security measures
designed to protect against identity theft and fraud. Also, you may want to inquire whether there may be lower
fees if you use partner banking institutions in foreign countries. Be sure to check out all the fees for foreign use
of your debit card before you leave.
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Activity 13: Compare ATM/ Debit/ Check Cards
ATM/Debit/Check Card Comparison Worksheet
Use this Comparison Worksheet to compare the fine print on ATM/debit/check cards you are considering.
Features:
Card:
Card:
Institution:
Card Name:
Card Type:
Fees:
ATM surcharges
Bank-owned ATM fees
Annual Card Fee
Annual Rewards Fee
Late Payment Fee
NSF fees
Overdraft fee
Fees for foreign use
Perks and rewards:
Rebates
Points
Frequent flier miles
Cash back
Other:
Check your statements for errors
You should check your bank statements every month. If you find an error, you must report it promptly. Write or
call your financial institution immediately if possible, but no later than 60 days from the date the first statement
was mailed to you that you think shows an error. Give your name and account number and explain why you
believe there is an error, what kind of error, and the dollar amount and date in question. If you call, you may be
asked to send this information in writing within 10 business days.
The financial institution must promptly investigate an error and resolve it within 45 days. For errors involving
new accounts (opened in the last 30 days), purchases with your debit card transactions, and foreign
transactions, the institution may take up to 90 days to investigate the error. However, if the financial institution
takes longer than 10 business days to complete its investigation, generally it must put back into your account
the amount in question while it finishes the investigation, called a recredit. For new accounts, the financial
institution may take up to 20 business days to credit your account for the amount you think is in error.
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The financial institution must notify you of the results of its investigation. If there was an error, the institution
must correct it promptly, for example, by making a recredit final. If it finds no error, the financial institution must
explain in writing why it believes no error occurred and let you know that it has deducted any amount
recredited during the investigation. You may ask for copies of documents relied on in the investigation.
The federal Electronic Fund Transfer Act (EFTA) protects you from errors, loss or theft of your debit card.
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However, unlike the Truth in Lending Act protections for credit cards, which cap a consumer's liability for
unauthorized transactions at $50, the law limits liability to $50 if the debit cardholder notifies the bank
within two business days after discovering the theft.
If you don't notify your bank within those two days, you could lose up to $500, or perhaps more.
In the worst-case scenario — if you receive a bank statement that includes an unauthorized debit-card
withdrawal and you wait more than 60 days to alert your bank — you could be liable for any amounts from
transactions made after that 60-day period.
The good news is that many banks don't hold a consumer responsible for unauthorized transactions if he or
she notifies the institution in a timely fashion. But remember that with a debit card, the money tapped by the
thief has already been taken out of your account.
QUESTION 1:
You don’t realize you have only $100 in your bank account and you want to use your debit card to buy
a $200 item. What will happen to your account?
QUESTION 2:
Questions about debit cards--True or False
1. Your liability on a debit card is the same or less as a credit card ______
2. The bank has 10 days to investigate any errors you bring to their attention ___
3. If you don’t notify your bank you lost your debit card you could be liable for $500 _____
QUESTION 3:
You are buying a product from a merchant you haven’t dealt with before. Should you use a debit or
credit card?
QUESTION 4:
On Monday, John’s debit card and PIN were stolen. On Tuesday, the thief withdrew $250, all the money
John had in his checking account. Five days later, the thief withdrew another $500, triggering John’s
overdraft line of credit. John did not realize his card was stolen until he received his bank statement,
showing withdrawals of $750 he did not make. He called the bank right away. What is John’s liability?
QUESTION 5:
When John got his bank statement he didn’t look at it and didn’t call the bank. Seventy days after the
statement was mailed to John, the thief withdrew another $1,000, reaching the limit on John’s line of
credit. What is John’s liability?
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Your Rights
A financial institution may send you a debit (EFT) card that is VALID FOR USE only if you ask for one, or to
replace or renew an expiring card. The financial institution must also give you the following information about
your rights and responsibilities:
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A notice of your liability in case the card is lost or stolen
A telephone number for reporting loss or theft of the card or an unauthorized transfer
A description of its error resolution procedures
The kinds of electronic fund transfers you may make and any limits on the frequency or dollar amounts
of such transfers
Any charge by the institution for using EFT services
Your right to receive records of electronic fund transfers
How to stop payment of a pre-authorized transfer
The financial institution’s liability to you for any failure to make or to stop transfers and
The conditions under which a financial institution will give information to third parties about your
account.
Generally, you must also get advance notice of any change in the account that would increase your costs or
liability, or would limit transfers.
A financial institution may send you a card that you did not request only if the card is NOT VALID FOR USE.
An unsolicited card can be validated only at your request and only after the institution makes sure that you are
the person whose name is on the card. It must also be sent with instructions on how to dispose of an
unwanted card.
You may stop any preauthorized payment by calling or writing the financial institution, but your order must be
received at least three business days before the payment date. Written confirmation of a telephone notice to
stop payment may be required. You should also contact the merchant or organization you authorized to debit
your account and some contracts require your notification to be in writing. If the payments you preauthorize
vary in amount from month to month, you have the right to be notified of all varying payments at least 10 days
in advance. Or you may choose to specify a range of amounts and to be told only when a transfer falls outside
that range. You may also choose to be told only when a transfer differs by a certain amount from the previous
payment to the same company.
The EFT Act which protects you with electronic funds transfer does not apply to automatic transfers from your
account to the institution that holds your account or vice versa. For example, they do not apply to automatic
payments made on a mortgage held by the financial institution where you have your debit card (EFT) account.
The EFT Act also does not apply to automatic transfers among your accounts at one financial institution.
Protect Your Debit Card
Protect your debit card as well as the account number, expiration date, security code on the back, and the
PIN. While in many cases you are not responsible for unauthorized transactions, it can be a hassle to resolve
the situation. Here's how to avoid becoming a victim:
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Never write your PIN on or near your card. Memorize it instead.
Don't give out bank account information over the phone or the Internet unless you have initiated the
contact or you know the person is who he or she claims to be. Don’t give your PIN over the telephone
unless you initiated the call and know it is the financial institution.
Don't share your debit card PIN, security code and other account information with friends or relatives
who aren't co-owners of your account.
46
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Take precautions at the checkout counter, ATM and gas pump. Always stand so that no one can see
the keypad where you enter your PIN. At retail establishments, it's best to use do-it-yourself scanners.
A dishonest employee may run your card through two scanners instead of one. The second scanner
could be capturing your account information to make a counterfeit card. In general, be alert for
suspicious-looking devices that may be used to "skim" information from your card.
If you use your debit card to shop online, consider extra precautions with your personal computer.
Experts advise installing and periodically updating virus and spyware protection and a "personal
firewall" to stop thieves from secretly installing malicious software on your personal computer remotely
that can be used to spy on your computer use and obtain account information.
Look at your bank statements as soon as they arrive. Or, better yet, review your account each week
by phone or the Internet. Promptly report any discrepancy, such as a missing payment or an
unauthorized transaction, to your bank or credit union. Your quick attention to the problem may help
limit your liability and give law enforcement authorities a head start on stopping the thief.
QUESTION 6:
What actions you should take to safeguard your debit card or any electronic transfers made into and
out of your bank account.
Safety Tips for Using Bank or Credit Union Accounts
1. Write ALL your transactions in your check register--checks, ATM withdrawals, debit card purchases,
deposits and online transactions, or print the online statement.
2. Write the type of transaction, date, check number (for checks only), dollar amount and subtract it from your
checking account balance in your checkbook register.
3. Review your online checking account weekly to ensure there has not been fraudulent activity on your
account.
4. Beware of “pharming” attempts. Pharming is a scamming practice in which malicious code is installed on a
personal computer or server, misdirecting users to fraudulent Web sites without their knowledge or
consent. Do not put your bank’s website in your internet Favorites. ALWAYS type the name in to prevent a
“pharming” fraud. http://searchsecurity.techtarget.com/sDefinition/0,290660,sid14_gci1097059,00.html)
5. Consider ordering duplicate checks, so you can staple the extra check to a bill that has been paid.
6. When you withdraw cash, write the purpose for the cash withdrawal on the ATM receipt so you can enter it
in your Spending Plan records.
7. Balance your bank statement monthly. This is your best defense against fraud and identity theft.
Immediately report any errors or lost or stolen checks to your bank or credit union!
8. Keep your bank statements, ATM receipts, deposit receipts and check registers with your other financial
records in a secured place in your home, so visitors do not have easy access to them. Keep good
records.
Tips to Avoid Banking Fees
1. Ask the bank or credit union for a copy of its fee schedule and review all charges. They might surprise
you.
2. Check out free checking accounts. Some institutions may require a certain minimum balance for free
checking. You can compare at fees at Bank Rate.
http://www.bankrate.com/brm/rate/chk_sav_home.asp
3. The non-sufficient funds (NSF) fee is one of the most expensive fees for overdrawing your checking
account (writing checks for more than you have in your checking account). Some banks and credit
unions will allow you to have an overdraft without charging you a NSF fee.
4. Keeping track of your checking account balance will keep you from overdrawing and incurring NSF
fees.
5. If you incur an overdraft charge ask if your bank or credit union will waive it by not deducting the
overdraft charge from your account.
6. Avoid ATM fees for using ATMs that are not-your-bank or credit union’s ATMs:
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7. Be aware of fees: counter checks, account closed early, early withdrawal of CDs, use of tellers and
inactive accounts.
8. You can comparison shop bank fees for safe deposit boxes, cashier’s checks, electronic funds
transfers (EFT), check printing, and money orders.
9. Keeping larger balances in your account will give you more benefits, such as free checks.
10. For online bill payment, be sure to check that your payment went through on your online and/or paper
statement. Be sure to write the confirmation number in your records.
Why a bank or credit union may not open an account for you.
Many banks choose not to open a checking or savings account if a person’s name is on the ChexSystem or
SCAN lists, The ChexSystem list has over 7 million consumers on it. This list identifies if a person has had a
checking or savings account closed by the bank or credit union due to overdrafts (or insufficient funds) or
fraudulent activity within the past five years. If you are on this list, you will remain in their database for 5 years.
You have the right to correct any inaccurate information your Chex report contains, but accurate negative info
is allowed to remain for 5 years. You have the right to examine your Chex report and dispute any inaccuracies.
Contact ChexSystems at 1-877-382-7226, or request your report at
https://www.consumerdebit.com/consumerinfo/us/en/chexsystems/report/index.htm
Most banks will terminate (close) accounts of customers they refer to ChexSystems. The ChexSystem
database will indicate if a customer subsequently repaid the outstanding debt (amount owing for the check and
fees) if the accounts were closed due to insufficient funds.
SCANSM, the Shared Check Authorization Network, is a database that helps members decide whether to
accept a check or open an account. This information helps reduce their returned check losses. SCAN SM can
describe any negative check information that has been reported for your bank accounts and identification
numbers. You may contact them at 1-877-382-7226 or order a copy of your SCAN Consumer Report at
https://www.consumerdebit.com/consumerinfo/us/en/scan/report/index.htm I
If you are having problems opening a checking account because you are listed in the ChexSystem, you may
want to find a bank or credit union that provides a “second chance checking.” The Fannie Mae Foundation
described a national program, called “Get Checking” that helps unbanked consumers and consumers with
prior checking account problems to open a checking account. You can go to the “Get Checking” website to
find a financial institution partner (bank or credit union near you) that offers a second chance checking
account. The bank or credit union may require you to complete a short financial education class, called Get
Checking Program, before they will open a checking account. See http://www.getchecking.org/ .
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What Is Credit?
Credit is money you borrow to pay for things. It is usually referred to as a loan. You make a promise to pay
back the money you borrowed plus interest. The interest is part of the cost of borrowing money. If you use
credit carefully, it can be useful to you. If you are not careful in the way you use credit, it can cause problems.
“Good credit” means that you make your loan payments on time to repay the money you owe. If you have a
good credit record, it will be easier to borrow money in the future.
Why are Your Credit History and Credit Score so Important?
The amount of money and the interest rate that you can borrow depends on your credit history. Credit rating
services will determine a credit score for you based on your credit history. Having a good credit score has
many benefits. It allows you to make a large purchase, such as a car or a house, and pay for it over time. Your
credit score can affect your ability to obtain a job as employers may check your credit history. It also can affect
your ability to get insurance. With regards to credit cards, your credit score will affect your credit limit or the
amount of money you can borrow and the interest rate you pay.
Credit Cards
According to the US Government of Accountability Office (GAO) 2006 study of credit cards, the number of
credit cards issued exceeds 691 million or more than twice the population (adults and children) of the US. Use
of credit cards has contributed to an expansion in household debt, which grew from $59 billion in 1980 to
roughly $830 billion by the end of 2005. Over three-quarters of families have credit cards. One third of
teenagers have credit cards cosigned with their parents. College students are responding to the many credit
card offers they get in the mail and have multiple credit cards.
Between 1980 and 2005, the amount that U.S. consumers charged to their cards grew from $69 billion per
year to more than $1.8 trillion. According to the 2004 Consumer Finance Survey, 44.4% of families had
outstanding credit card balances with a median value of $2200 or an average of $5100. The average value for
Washington State is $5100 in 2006.
Evaluating Credit Cards -- How Will You use Your Credit Card?
The best habit to adopt with credit cards is to pay your balances off in full every month. If you don’t adopt this
habit, and other features such as frequent flyer miles don’t interest you--your best choice may be a card that
has no annual fee and offers a longer grace period.
If you sometimes carry over a balance from month to month, you may be more interested in a card that carries
a lower interest rate (stated as an annual percentage rate, or APR).
If you expect to use your card to get cash advances, you’ll want to look for a card that carries a lower APR and
lower fees on cash advances. Some cards charge a higher APR for cash advances than for purchases.
Four Types of Credit Cards—Which One is Right for You?
Open-end (or revolving) credit includes bank and department store credit cards, gasoline company cards,
home equity lines of credit, and check-overdraft accounts that let you write checks for more than your actual
balance with the bank. Open-end credit can be used again and again, generally until you reach a certain
prearranged borrowing limit. The four general types of credit cards are:
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Secured cards (money security deposit )
Regular cards
Premium or Rewards (mileage, discounts or cash) cards
Student cards
1. Secured cards require a security deposit.
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If you have had trouble paying your bills on time or had trouble with credit cards in the past, a secured credit card may
be one way to obtain credit again.
 The larger the security deposit, the higher the credit limit.
 Secured cards are usually offered to people who have limited credit records—people who are just starting out or
who have had trouble with credit in the past.
Advantages: Since most secured credit card companies report to the three credit bureaus, using a secured
credit card responsibly may be an opportunity to establish or repair your credit rating.
Disadvantages: You give the credit card company a money deposit to “secure” your credit card account, usually
$200-250. Secured credit cards have higher interest rates and annual fees, since these are higher risk credit
accounts.
2. Regular cards do not require a security deposit and offer a few features.
 These cards may offer an introductory zero or low interest rate credit card for a limited time period;
then the interest rate jumps to higher variable or fixed interest rate.
 Most regular cards have higher credit limits than secured cards but lower credit limits than premium
cards.
 If you can pay off the charged credit card debt quickly, the zero or low interest rate credit card may be
best for you.
Advantages: Most zero or low interest cards offer a very low (or 0%) rate on balance transfers from
other cards over a limited period.
Disadvantages: The low interest rate usually lasts for a limited period, and then goes to a higher rate,
around 11-16%. New purchases are not usually included in these bargain rates, so check to be sure at
what interest rate new purchases will have. One late payment and the card balance will jump to the
higher default rate immediately.
3. Premium or rewards credit card:
If you can make the majority of your purchases on a credit card and pay off the balance each month, a
premium or rewards credit card may suit you.
Advantages: The premium or reward credit cards usually offer airline miles, hotel and restaurant
discounts, cash back or points toward purchasing specific merchandise based on the amounts
charged to the credit card account. Some rewards cards may offer as much as 5 percent cash back on
select purchases with no annual fee.
Disadvantages: Some premium or rewards credit cards have high interest rates and annual fees that
negate the reward benefits. Other reward credit cards have complex and unfavorable redemption
policies. So check what interest rate you will have.
4. Student credit cards.
If you’re a college student and can handle money responsibly by making payments on time, and can
paying off your balance and not go over your credit limit, a student credit card may be the way to go.
Advantages: Students can qualify for student credit cards without an established credit rating. Many
offer additional benefits, such as cash back or bookstore discounts.
Disadvantages: Some credit card companies charge higher interest rates for students. However, it’s
too easy for students who are not used to handling finances and credit to charge up huge debts
quickly. Use credit cards sparingly.
Does the card offer incentives and other features?
Many credit card companies offer incentives (rewards) to use the card and other special features, such as:
rebates (money back), frequent flier miles, additional warranty coverage, car rental insurance, etc.
The most important tips in choosing credit cards are:
 to know the type of card for which you are applying,
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to read the “fine print” terms of the credit card which should include: interest rate, how the interest is
calculated, what the penalty interest rate and fees are for late payments or over your credit limit
penalties.
Review Terms and Conditions When Evaluating Credit Cards
Creditors must tell you when finance charges begin on your account, so you know how much time you have to
pay your bill before a finance charge is added. Creditors may give you a 25-day grace period, for example, to
pay your purchase balance in full before you must pay a finance charge.
Creditors also must tell you the method they use to figure the balance on which you pay a finance charge; the
interest rate they charge is applied to this balance to compute the finance charge. Creditors use a number of
different methods to arrive at the balance. Study them carefully; they can significantly affect your finance
charge.
What is the annual percentage rate (APR)?
The annual percentage rate (APR) is the interest rate you will pay if you carry over a balance, get a cash
advance, or transfer a balance from another card. The APR states the interest rate as a yearly rate. For
example, a creditor that charges 12 percent interest each month would quote you an APR of 18 percent.
Unlike the mortgage, fees such as annual membership fees, transaction charges, and points, for example, are
listed separately; they are not included in the APR of open-credit instruments. Keep these fees in mind and
compare all the costs involved in the plans, not just the APR. If the card has an introductory rate, you’ll see
both that rate and the rate that will apply after the introductory rate expires.
What are multiple annual percentage rates—APRs?
A single credit card may have several APRs: One APR for purchases, another for cash advances, and yet
another for balance transfers. The APRs for cash advances and balance transfers often are higher than the
APR for purchases (for example, 14% for purchases, 18% for cash advances, and 19% for balance transfers).
 Tiered APRs. These APRs have with different rates applied to different levels of the outstanding balances
(for example, 16% on balance of $1-$500 and 17% on balances above $500.
 A penalty APR (or default APR). The APR may increase if you are late in making payments. (For
example, your card agreement may say, “If your payment arrives more than ten days late two times within
a six-month period, the penalty rate will apply.)
 An introductory APR. A different rate will apply after the introductory rate time period expires.
 A delayed APR. A different rate will apply in the future. (For example, a card may advertise that there is
“no interest until next May.” Look for the APR that will be in effect after May.)
If you carry over a part of your balance from month to month, even a small difference in the APR can make a
big difference in how much you will pay over a year.
What are fixed vs. variable APRs?
 A few credit cards are “fixed rate”—the APR doesn’t change, or doesn’t change often.
 Other credit cards are “variable rate”—the APR changes from time to time. The rate is typically tied to
another interest rate, such as the prime rate (the rate businesses borrow money) or the Treasury bill rate
(short-term government borrowing rate). If the prime rate or the Treasury bill changes, the rate on your
credit card may change, too. See the information on the credit card application and in the credit card
agreement to see how often your credit card’s APR may change.
Question 7:
How are credit cards or open-credit APRs different from mortgage APRs?
How long is the grace period?
The grace period is the number of days you have to pay your bill in full without incurring a finance charge. (For
example the credit card company terms may say that you have “25 days from the statement date, provided
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you paid your previous balance in full by the due date.) The statement date is given on the bill. Other credit
card companies may note the due date on the statement. Keep in mind that the date is the day the payment
must be received. If you sent it in the mail on the due date or even paid it with your online bill payment service,
it will most likely be late
How is the finance charge calculated?
The finance charge is the dollar amount you pay to use credit. The amount depends in part on your
outstanding balance, average daily balance and the APR. Credit card companies use one of several methods
to calculate the outstanding balance. The method can make a big difference in the finance charge you’ll pay.
Depending on the balance you carry and the timing of your purchases and payments, you’ll usually have a
lower finance charge with one-cycle billing and a balance that excludes new purchases.
Some credit cards have a minimum finance charge. You’ll be charged that minimum even if the calculated
amount of your finance charge is less. For example, your finance charge may be calculated to be 35¢--but if
the company’s minimum finance charge is $1.00, you’ll pay $1.00. A minimum finance charge usually applies
only when you must pay a finance charge--that is, when you carry over a balance from one billing cycle to the
next.
What is the average daily balance?
The average daily balance is the method used to calculate your outstanding balance if you carry over a
balance and pay a finance charge. An average daily balance is determined by adding each day's balance and
then dividing that total by the number of days in a billing cycle. The average daily balance is then multiplied by
a card's monthly periodic rate, which is calculated by dividing the annual percentage rate by 12. A card with an
annual rate of 18 percent would have a monthly periodic rate of 1.5 %. If that card had a $500 average daily
balance, it would yield a monthly finance charge of $7.50.
Some creditors, for instance, take the amount you owed at the start of the billing cycle and subtract any
payments made during that cycle. New purchases are not counted. This is called the adjusted balance
method. With the previous balance method, creditors simply use the amount owed at the start of the billing
cycle to compute the finance charge.
Under one of the most common methods, the average daily balance method, creditors add your balances for
each day in the billing cycle and then divide that total by the number of days in the cycle. Payments made
during the cycle are subtracted to get the daily amounts, and depending on the plan, new purchases may or
may not be included. Under another method, the two-cycle average daily balance method, creditors use the
average daily balances for two billing cycles to compute your finance charge. Again, payments will be
subtracted to get the balances, but new purchases may or may not be included.
Be aware that the amount of the finance charge will vary considerably depending on the method used, even
for the same pattern of purchases and payments.
If you receive a credit card offer or an application, the creditor must give you information about the APR and
other important terms of the plan (for example, annual fees and late payment fees) at that time.
Truth in Lending does not set the rates or tell the creditor how to calculate finance charges; it requires only that
the creditor tell you the method that it uses. You should ask for an explanation of any terms you don’t
understand.
Question 8:
You are trying to pay down a credit card balance. Which of the following is best when computing a
finance charge?
A. two-cycle daily balance with new purchases
B. one-cycle daily balance with adjusted balance
C. one-cycle daily balance with new purchases
D. two-cycle daily balance with previous balance
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What is the minimum finance charge?
Some credit cards have a minimum finance charge which usually applies only when you carry over a balance
from one billing cycle to the next.
How much is the credit limit?
The credit limit is the maximum total amount—for purchases, cash advances, balance transfers, fees and
finance charges—you may charge on your credit card.
What are the fees?
Most credit cards charge fees under certain circumstance such as the annual fee or cash advance fee, late
payment fee, over-the-credit-limit fee and other fees.
 Annual fees. The amount you’ll be charged each twelve-month period for simply having the card.
 Minimum finance charge. The minimum, or fixed, finance charge that will be imposed during a billing
cycle. A minimum finance charge usually applies only when a finance charge is imposed, that is, when
you carry over a balance from the prior month.
 Transaction fee for cash advances. The charge that will be imposed each time you use the card for a
cash advance.
 Balance-transfer fee. The fee that will be imposed each time you transfer a balance from another card.
 Late-payment fee. The fee that will be imposed when your payment is late.
 Over-the-credit-limit fee. The fee that will be imposed if your charges exceed the credit limit set for your
card.
What is the cardholder agreement?
The cardholder agreement is a written statement that gives the terms and conditions of a credit card account.
The cardholder agreement is required by Federal Reserve regulations. It must include the Annual Percentage
Rate, the monthly minimum payment formula, annual fee if applicable, and the cardholder's rights in billing
disputes. Changes in the cardholder agreement may be made, with written advance notice, at any time by the
issuer. Rules for imposing changes vary from state to state, but the rules that apply are those of the home
state of the issuing bank, not the home state of the cardholder.
What is a pre-approved credit card account?
A credit card offer with "pre-approved" only means that a potential customer has passed a preliminary creditinformation screening. A credit card company can turn down the customers it invited with "pre-approved" junk
mail if it doesn't like the applicant's credit rating.
Note that the use of credit can help us or hurt us with our finances. Save for larger purchases. Use
credit cards wisely when you know you can readily pay off the balance to reduce or avoid the interest
rate costs.
How do I find information about specific credit cards?
You can find lists of credit card plans, rates, and terms on the Internet, www.bankrate.com, in personal finance
magazines, and in newspapers. The Federal Reserve System surveys credit card companies every six
months. You’ll need to get the most recent information directly from the credit card company by phoning the
company, looking on the company’s web site, or reading a solicitation or application.
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Under federal law, all solicitations and applications for credit cards must include certain key
information, in a disclosure box similar to the one shown.
Required Disclosure in
Customer Application or Agreement
Annual percentage rate
(APR) for purchases
2.9% until 11/1/06
Other APRs
Cash-advance APR: 15.9%
after that, 14.9%
Balance-Transfer APR: 15.9%
Penalty rate: 23.9% See explanation below.*
Variable-rate information
Your APR for purchase transactions may vary.
The rate is determined monthly by adding
5.9% to the Prime Rate.
Grace period for repayment
of balances for purchases
25 days on average
Method of computing the
balance for purchases
Average daily balance (excluding new
Annual fees
None
Minimum finance charge
$.50
purchases)
Transaction fee for cash advances: 3% of the amount advanced
Balance-transfer fee: 3% of the amount transferred
Late-payment fee: $25
Over-the-credit-limit fee: $25
* Explanation of penalty. If your payment arrives more than ten days late two times within a six-month period, the penalty rate will
apply.
** The Prime Rate used to determine your APR is the rate published in the Wall Street Journal on the 10th day of the prior month.
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Activity 18: Evaluating a Credit Card Offer
You’ve received the following credit card solicitation in the mail.
Read the solicitation disclosure and answer the following questions:
A. What interest rate are you charged on your purchases if you don’t pay your full outstanding balance at
the end of the month?
B. Is this interest rate fixed?
C. How is the interest computed?
D. What are you charged on cash advances?
E. Besides the interest rate, what other charges will you incur if you have an outstanding balance? If your
payment doesn’t clear?
F. Assume you had an average daily balance of $500 for the month. Calculate what interest rate and
other fees you would pay.
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2009
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Activity 19: Credit Card Account Comparison
Use this Credit Card Account Comparison Worksheet to compare the fine print on credit cards you’re
considering to keep track of the terms with the credit card company.
Credit Card Account Comparison Worksheet
Features
Card:
Card:
Issuer:
Credit limit:
Interest rate for:
Purchases
Penalty for late payment
Cash advances
Balance transfers
Fees:
Annual
Late payment
Over-credit limit
Account Set Up
Cash advance
Rewards program
Finance charges:
One-cycle or two-cycle billing
Minimum finance charge
Interest calculated:
Fixed, variable or tiered basis
Grace period (# of days):
If you carry a balance
If you pay off the balance monthly
For cash advances
Type of card:
Secured, regular , student, rewards
Perks and rewards:
Rebates
Points
Frequent flier miles
Cash back
Insurance
Other
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Credit Card Concerns—Lost/Stolen Cards or Errors
If you lose your credit or charge cards or if you realize they've been lost or stolen, immediately call the
issuer(s). Many companies have toll-free numbers and 24-hour service to deal with such emergencies. By law,
once you report the loss or theft, you have no further responsibility for unauthorized charges. In any event,
your maximum liability under federal law is $50 per card.
What are Your Liability Limits?
If your credit card is lost or stolen--and then is used by someone without your permission--you do not have to
pay more than $50 of those charges. This protection is provided by the federal Truth in Lending Act. You do
not need to buy “credit card insurance” to cover amounts over $50.
If you discover that your card is lost or stolen, report it immediately to your credit card company. Call the tollfree number listed on your monthly statement. The company will cancel the card so that new purchases
cannot be made. The company will also send you a new card.
Make a list of your account numbers and the companies’ phone numbers. Keep the list in a safe place. If your
wallet or purse is lost or stolen, you’ll have all the numbers in one place. Take the list of phone numbers--not
the account numbers--with you when you travel, just in case a card is lost or stolen.
What Can You do About Billing Errors?
The federal Fair Credit Billing Act covers billing errors. Examples of billing errors include the following:







A charge for something you didn’t buy
A bill for an amount different from the actual amount you charged
A charge for something that you did not accept when it was delivered
A charge for something that was not delivered according to agreement
Math errors
Payments not credited to your account
A charge by someone who does not have permission to use your credit card
If your credit card bill has an error, take this action:
1. Write to the credit card company within 60 days after the statement date on the bill with the error. Use
the address for “billing inquiries” listed on the bill. Tell the company:
 Your name and account number
 That you believe the bill contains an error, and why you believe it’s wrong
 The date and amount of the error (the “disputed amount”)
2. Pay all the other parts of the bill. You do not have to pay the “disputed amount” or any minimum
payments or finance charges that apply to it.
If there is an error, you will not have to pay any finance charges on the disputed amount. Your account must
be corrected.
If there is no error, the credit card company must send you an explanation and a statement of the amount you
owe. The amount will include any finance charges or other charges that accumulated while you were
questioning the bill.
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What if the Item You Purchased is Damaged?
The federal Fair Credit Billing Act allows you to withhold payment on any damaged or poor-quality goods or
services purchased with a credit card--even if you have accepted the goods or services--as long as you have
made an attempt to solve the problem with the merchant.
The sale must have been for more than $50 and must have taken place in your home state or within 100 miles
of your home address. You should notify the credit card company in writing and explain why you are
withholding your payment.
You may withhold the payment while the credit card company investigates your claim. If you pay the charges
for the goods on your credit card bill before the dispute is resolved, you will lose your right to make a claim.
Activity 20: Correct an Error on Your Credit Card Bill--Steps and Information to
Supply
You purchased a flashlight from a store for $11.14. When your credit card bill arrived, the charge was $111.40.
A. List the steps you should take to correct this error with the credit card company.
B. Write what information you must supply the credit card company to correct this error.
Lost or Stolen Credit Cards
If your wallet is stolen, your greatest cost may be inconvenience because your liability on lost or stolen cards is
limited under Truth in Lending. You do not have to pay for any unauthorized charges made after you notify the
card company of loss or theft of your card. So keep a list of your credit card numbers and notify card issuers
immediately if your card is lost or stolen. The most you will have to pay for unauthorized charges is $50 on
each card even if someone runs up several hundred dollars worth of charges before you report a card missing.
Unsolicited Cards
It is illegal for card issuers to send you a credit card unless you ask for or agree to receive one. However, a
card issuer may send, without your request, a new card to replace one that is about to expire.
Question 9
You were billed for a product that you ordered but that you did not receive on your latest credit card
statement. What should you do?
Credit Card Do’s and Don’ts
Do:

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2009
Read all the fine print in your agreement and evaluate all fees and charges before you sign.
Pay all credit cards in full. If at all possible, do not maintain outstanding balances.
Sign your cards as soon as they arrive.
Keep a record of your account numbers, their expiration dates, and the phone number and address of
each company in a secure place. Some fraud experts recommend that you photocopy the cards you
carry with you.
Keep an eye on your card during the transaction, and get it back as quickly as possible.
Void incorrect receipts and destroy carbons.
Save receipts to compare with billing statements.
Open bills promptly and reconcile accounts monthly, just as you would your checking account.
Report any questionable charges promptly and in writing to the card issuer and do not pay for
purchases where product was not delivered or defective.
59


Notify card companies in advance of a change in address.
Correct any billing errors by contacting your credit card company as soon as possible
Don’t:
 Have more than two credit cards.
 Spend up to your credit limit.
 Lend your card(s) to anyone.
 Leave cards or receipts lying around.
 Sign a blank receipt. When you sign a receipt, draw a line through any blank spaces above the total.
 Disclose your account number.
 Give out your account number over the phone unless you're making the call to a company you know is
reputable.
 Pay for purchases you are disputing.
 Automatically close credit cards when you no longer use them. Put them in a safe place
This information is adapted from Choosing a Credit Card, from the Federal Reserve Bank website:
www.federalreserve.gov/pubs/shop and Financial Literacy: Credit Cards from Bankrate.com,
www.bankrate.com.
Online Resources:
Checking and Savings, Bankrate.com, http://www.bankrate.com/gookeyword/news/news_checking_home.asp
ChexSystems, https://www.consumerdebit.com/consumerinfo/us/en/chexsystems/report/index.htm
SCAN, Shared Check Authorization Network,
https://www.consumerdebit.com/consumerinfo/us/en/scan/report/index.htm I
Bank Insurance Limits, Federal Deposit Insurance Corporation,
http://www.fdic.gov/deposit/deposits/insuringdeposits/index.html
Credit Union Insurance Limits, National Credit Union Administration,
http://www.ncua.gov/ShareInsurance/Index.htm
Check Survey 2007, Federal Reserve Bank,
Case Studies: Innovation in Personal Finance for the Unbanked: Emerging Practices from the Field, Fannie
Mae Foundation, 2003, http://www.fanniemaefoundation.org/programs/pdf/fscs_Case_Studies_Intro.pdf
Pharming, SearchSecurity.com,
http://searchsecurity.techtarget.com/sDefinition/0,290660,sid14_gci1097059,00.html
Financial Literacy on Credit Cards, www.bankrate.com
Compare Credit Card Rates at: www.creditcards.com
Choosing a Credit Card, www.federalreserve.gov/pubs/shop
Consumer Protection - www.dfi.wa.gov
2009
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Unit 4: Organizing Your Records
Misplaced financial records can waste time and money. Organizing our records keeps us from feeling out of
control. Misplaced bills might incur late fees. Late fees can damage credit rating scores. Low credit rating
scores may affect our ability to get employment, a car or house loan. For these reasons, we should eliminate
clutter and organize our financial records.
Tips to Get Organized





The first step in getting organized is to stop the clutter from coming into your home. Go online to
www.opt-out.org or call 888-5-OPT-OUT (888-567-8688), to reduce the amount of junk mail
received from creditors. This is a company run by the three major credit reporting companies.
Throw out junk mail when it arrives. Throw junk mail into the recycle bin before setting it down.
Bank on-line. Banking online will save you time (about 2-3 hours) and money (stamps and late
payment fees). Online banking allows you to check daily on your account balances.
Eliminate “bargain” shopping. Buy only what you need. Avoid buying something because it is a
great buy. Avoiding “impulse buying” will save you money needed for other financial goals.
Have a designated place for all unpaid and paid bills. (file folder, basket, or box).
Organize the Records You Have to Keep
Keep all receipts for purchases in one place. Maintain the following file folders:

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


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



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



2009
Bills-to-Pay – Keep all unpaid bills together. Group together by payment due date with the earliest
ones first.
Bills Paid – Write date paid and amount paid on all bill statements, if you paid bills online, write the
confirmation number on your bill statement.
Checking/Savings Account Statements – Keep statements, deposits and ATM receipts.
Insurance – Keep separate folders for auto, health, homeowners or renters, disability, life, long-term
care, etc.
Credit Card statements – Keep separate folders for each account.
Home Mortgage and Home Improvements - Keep mortgage or rental agreements, home improvement
repair statements, etc.
Auto Repair – Keep service records and receipts.
Spending Plan or budget – Keep Spending Plan worksheets for review.
Investment Accounts – Keep all investment accounts and statements
Retirement Accounts – Keep statements of 401ks, pensions, IRAs, 403bs.
Taxes – Keep current year and past year tax records.
Will and Testament or Trust – Keep copy of most recent will, plus the contact information of the
attorney who drew up your documents.
Children’s Accounts – Keep statements for savings accounts, etc.
Medical payments and records. Make sure insurance pays the correct amount and you do not get
behind on your co-pay. Keep records on shots and medicines you have taken or been given.
Write up a master list of accounts, addresses, and account numbers in a fire proof box. This can be
used for address changes if you move. Date and update it every 3-6 months.
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What Financial Records to Keep and for How Long?
Type of record
Bills
Length of
Time
One-year to
permanently
Credit card receipts and statements
45 days to
seven years
Bank records
One-year to
permanently
Paycheck stubs
One year
Taxes
Seven years
Reason to Keep
 Review your bill statements once a year.
 For most cases, when the canceled check from a
paid bill was shown on your checking statement
(or the canceled check has been returned with
your statement), you can shred or burn the bill.
 However, bills for large purchases, such as
appliances, furniture, cars, jewelry, computers,
rugs, collectibles, antiques, etc., should be kept
in an insurance file for proof of their value in the
event of loss, damage, flood, or fire.
 Keep your original receipts until you get your
monthly statement.
 Shred or burn the receipts if the receipts match
the monthly statement, and if they are not a
large purchase listed above to keep the receipt.
 Go through your checks each year and keep
those related to your taxes, business expenses,
mortgage payments and home improvements.
 Shred or burn those that have no long-term
importance.
 Keep all your paycheck stubs until you receive
your annual W-2 form from your employer;
make sure the information matches the stubs
and W-2.
 If it does match, shred or burn the stubs.
 If it does not match, request a corrected form,
known as a W-2c.
The IRS has three years from your tax filing date to
audit your tax returns, if it finds questionable good
faith errors.
Tax returns (forms) filed with IRS
 The three-year deadline also applies if you
discover a mistake in your return and decide to
file an amended tax return to claim a refund.
 The IRS has six years to challenge your return if it
thinks you under-reported your gross income by
25% or more.
Receipts/canceled checks (charitable
contributions, mortgage interest,
alimony and retirement plan
contributions)
Records for tax deductions you took on
your tax forms
There is no time limit if you failed to file your return
or filed a fraudulent tax return.
IRA contributions
Permanently
If you made a non-deductible contribution to your
IRA, keep your records indefinitely to prove that you
paid tax on this money when it comes time for you
to withdraw from your IRA account(s).
Retirement/Savings plan statements
One year to
permanently
 Keep the quarterly statements from your 401(k) or
other plans until you receive the annual
summary statement. If it matches up, then
shred or burn the quarterly statements.
 Keep the annual summary statements until you
retire or close the account.
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Brokerage statements
Until you
sell the
securities
Keep the purchase confirmations or sales slips from
your brokerage or mutual fund to prove whether you
have capital gains or losses at tax time.
House/condominium records
Six years to
permanently
 Maintain deeds, mortgage documents, title, cost
of improvements, and closing statements in a
safe place permanently.
 Keep tax, rental agreements, rental receipts and
repairs for 7 years.
 Keep records of the expenses incurred in selling
and buying the house/property, such as legal
fees and your real estate agent’s commission,
for six years after you sell your house.
 Keeping these records is important because any
improvements you make on your house, as well
as expenses in selling it, are added to the
original purchase price or cost basis. This adds
up to a greater profit (also called capital gains)
when you sell your house. Therefore, you lower
your capital gains tax from the sale of your
house.
Loan agreements
When
outstanding
 Keep copies of all outstanding loan agreements
and most recent statements indicating how
much you have repaid
Insurance policies
Long term
care and life
insurance –
permanently
 Keep your insurance cards in your cars as
required by law.
 Keep copies of your most recent homeowners,
auto, and umbrella insurance policies so that
claims can be made easily and efficiently.
 Keep both long-term care and life insurance in a
safe place and let a responsible person know
how to find them.
 Create and update an annual inventory of all
personal property. Include appraisals or
receipts. Keep a copy of this in a safe place
outside of your home.
Others one
year after
expiration
Health care expenses
One year to
seven years
 Keep your original receipts to file health insurance
and flexible spending account claims
 Keep medical receipts for deductions that you
claimed on your tax return
Question 1:
How long should you keep your credit card receipts?
Question 2:
How long should you keep your bank records?
Reasons You Should Balance Your Checkbook Register Monthly
To be in control of your money it is wise to check your checking balances frequently and reconcile or balance
your checkbook register to your account statement. Balance your checkbook each month to know where and
how you spend your money. If you do not balance your checkbook, bounced checks or checking balance
errors can cause expensive fees and hurt your credit rating. Balancing your check register monthly will allow
you to catch any math errors (or the bank’s errors) and correct them within the bank’s 60-day notification
period. If you forget to list an ATM withdrawal, debit card purchase, or other transaction, you may receive
notification of insufficient funds (NSF) and pay a fee of $20 - $30 per transaction.
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Activity 21: Checkbook Register and Account Statement Balancing
When you get your checking account statement, be sure to balance your checkbook activity to the bank
account statement or with the on-line statements from the bank or credit union. To balance your checkbook
register compare your check register (deposit and withdrawal receipts, ATM deposit/withdrawal receipts and
debit card receipts) with the bank account statement. Be sure to list and subtract any service charges or
automatic withdrawals. After all financial transactions have been recorded in both places; the balances should
be the same.
Complete the following Check Register and Account Statement Balancing Activity using the information
found in the Personal Money Management Workbook.
1. Evaluate your checkbook register and checking account monthly statement by placing your
checkbook register and checking account statement side by side. (See the Checkbook Register and
Account Statement Balancing data at the end of this section.)
 Place a check mark next to all matching transactions that are listed in both places—checkbook
register and account statement.
 Don’t put a check mark next to transactions that do not match.
2. Change the checkbook register so it includes all transactions listed on the account statement.

Write down any transactions in the spaces below that are not on the checkbook register but appear
on the account statement. Put a check mark next to these transactions on both the checkbook
register and the account statement.
Date:

Check #
Description
Debit (Subtract)
Deposit (Add)
List any transactions that are listed on both the checkbook register and the account statement but
don’t match in dollar amount. Calculate the difference between them.
Description
Debit (Subtraction)
Deposit
(Addition)
Check Register
Account Statement
Difference (indicate whether
positive or negative)




2009
Record the difference (list whether positive or negative) on the checkbook register. Under
“Description” write “correction.”
If the difference is a positive amount, list it under the deposit column of the checkbook register. If the
difference is a negative amount, list it under the debit column of the check register.
Put a check mark next to these transactions that appear on both the checkbook register and
checking account statement.
Calculate Morgan’s revised checkbook register balance and list it here: $_________.
64
3. Change the checking account statement to include all transactions listed in the checkbook
register.
 List any additional transactions that are not on the checking account statement that appear on the
checkbook register.
Date
Check #
Description
Debit (Subtract)
 Calculate Morgan’s revised checking account statement balance:
List the Ending balance shown on the checking account statement:
Subtract the additional debits not on the checking account statement:
Add the additional deposits not on the checking account statement:
Enter the revised checking account statement balance:
List Morgan’s revised checking account statement balance:
Deposit (Add)
$___________
- ___________
+ __________
= __________
$ __________
4. Compare the revised checking account statement balance and the revised checkbook register
balance to see if they are the same.
 Revised checkbook register balance :
$__________
 Revised checking account statement balance
$__________
 If the two balances do not match, go back and check the calculations at each step.
Adapted from the Washington Society of Certified Public Accountants
See the information on the next page to begin this Checkbook Register and Account Statement Balancing
Activity.
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65
Activity 21: Checkbook Register and Account Statement Balancing Data
Morgan’s Checkbook Register and Account Statement
Checkbook Register

Check or
Date
Receipt #
Check
Written
4/1
4/3
201
4/4
202
4/8
4/12
203
4/16
204
4/20
4/21
4/25
4/27
205
4/28
Description
Debit or
Withdrawal
Opening deposit
Drug store
Grocery store
Deposit/paycheck
VOID check/made error writing
Car supplies and parts
Deposit
Debit card -groceries
ATM –cash withdrawal
Rent
Deposit/bonus
Checking Account Statement
Morgan Smith
Vista Drive
San Bruno, CA 12345
Beginning Balance
Total Deposits
Total Withdrawals
Ending Balance
Deposit
(addition)
Balance
$600.00
$30.00
$70.00
$300.00
$50.00
$140.00
$60.00
$100.00
$325.00
1-800-555-1234
Statement period:
Account Number:
$75.00
$600.00
$570.00
$500.00
$800.00
$800.00
$750.00
$990.00
$930.00
$880.00
$555.00
$630.00
XYZ Bank
4/1/07 to 4/30/07
1234567890

$0.00
$1,040.00
$572.00
$468.00
Deposits to Account
Date
4/1
4/8
4/20
Amount
$600.00
$300.00
$140.00
Withdrawals from Account
Date Paid
Check #
4/7
201
4/8
202
4/20
205*
4/22
Debit card
4/25
ATM
4/27
Non-ATM fee
4/30
Service Charge
Amount
$30.00
$50.00
$325.00
$60.00
$100.00
$2.00
$5.00
Online Resources:
360° of Financial Literacy—Your Money, Your Life, American Institute of Certified Public Accountants,
http://www.360financialliteracy.org/
Chatzy, Jean, Money Management, http://www.oprah.com/money/jeanchatzky
What records to keep and for how long? Bankrate.com, www.bankrate.com
Washington Society of Certified Public Accountants, https://www.wscpa.org/wscpa/FinLit/resources.cfm
2009
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Unit 5: Protect Yourself from Costly Services, Identity
Theft and Fraud
Living on a tight spending plan makes every dollar count. If you don’t have a checking or savings account to
cash checks and pay your bills, odds are you’re using costly banking alternatives by paying too much for these
services.
Check–Cashing Stores
Check cashing stores provide services for people who are reluctant to, or unaware of how to, use a bank.
Unlike banks, check cashing stores are not regulated or insured. Often these stores are located in low-income,
minority or economically vulnerable communities, where these stores can seem like an easy solution to the alltoo-common fear or confusion about working with a bank. Customers at check-cashing stores most commonly
cash their paychecks, but these stores also typically offer to cash:
 Personal checks (checks made out to you from someone else, or your own check made out to “cash”)
 Money orders
 Federal benefit payment checks (i.e. unemployment, welfare, Social Security benefits, Veterans Affairs
benefits, etc.)
 Federal and state tax refund checks
 Insurance checks or drafts
Check cashing stores will cash your government, payroll or personal check but at a high cost. In Washington,
many check-cashing stores charge a fee of $4 for every $100 on a payroll check. So if you have an $800
payroll check, you’re paying $32 to cash it.
Check cashing stores also offer “convenience” services like the ability to pay telephone and utility bills as well
as to purchase lottery tickets and money orders. However, the convenience these stores offer comes at a
steep price.
Individuals and families who use check-cashing stores as their primary financial services institution
(instead of a bank or credit union), can lose a significant amount of income through the fees charged
at these stores. A Consumer Federation Association (CFA) study estimated that a typical family earning
$20,000 a year can expect to spend between $86 and $500 a year for check-cashing services. In contrast, a
bank would offer the same services for approximately $30-60 annually. Even if you don't have an account,
most banks, savings bank, and credit unions will cash government and payroll checks for less than the check
cashing store charges.
When you use a check cashing store, ask for the fee in the dollar amount. Many check cashing stores post
their fees in percentages, leaving customers unsure of what it really costs to cash the check. Make sure they
tell you the fee in dollar amounts so you can clearly understand the costs. Insist on an itemized receipt. Many
check cashing stores charge different fees depending on the time of day and the employee who cashes your
check. Ask for an itemized receipt that lists the amount of the check, the fee, and the amount of cash received.
Then compare the amounts with the fees you were told or that were posted at the store.
Check cashing services may also include the ability to send money abroad. For many immigrants, a portion of
their paycheck gets sent to family in their home countries. These also come at a high cost with a fee for check
cashing and another fee for transferring the funds.
Alternatives to Check Cashing Stores
Instead of going to a check-cashing store, consider using:
 A local bank or a credit union may have branches in your neighborhood or on the way to work. The
banks and credit union typically have accounts that offer a low required minimum balance and you can
cash as many checks as you would like for free.
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o
o
o
o
o
Even if you don't have an account, most banks, savings and loans, and credit unions will cash
government and payroll checks for a lower fee than a check cashing store charges.
Many banks and credit unions also offer less-expensive money wiring and transfer services for
you to send money abroad compared to using a check-cashing store for the this service.
The monthly fee for opening and maintaining a bank account can be less than cashing just
one check at a check-cashing store. Over the long run, opening and maintaining a bank
account can save you a significant amount of money compared to using a check-cashing
store.
For example, a study by the nonprofit “Organization for a New Equality,” a Washington
nonprofit group that assists the poor, women and minorities, found that:
A person who makes $1,050 after taxes each month and uses a typical check-cashing
store will pay an average of $219.24 in fees a year, compared with $30 a year for a
typical basic checking account, which is a difference of nearly $200 for the same
service!
If you are unsure about which bank to use or how to find a bank that you will be comfortable
using, ask family and friends if they bank and if so, do they recommend their branch?
Bankrate.com (www.bankrate.com) also offers a Safe & Sound service rating banks, thrifts
and credit unions nationwide. The Credit Union National Association (CUNA) offers a Credit
Union Locator online service http://www.creditunion.coop/cu_locator/index.html for you to find
a credit union in your area.
 Look into an ETA as an option for receiving federal benefits. If you receive a federal benefit such as a
tax refund or social security payment, wage, salary or retirement benefit, you can open an Electronic
Transfer Account (ETA) to get fast, safe access to your money.
o Designed by the U.S. Treasury, the ETA ensures that your federal payment is automatically,
directly deposited in your account and available for you to access on the same day.
o ETAs are federally insured and cost no more than $3/month to maintain. You’ll get a monthly
statement on your account activity and be able to withdraw cash from your account up to 4
times a month and four balance inquiries per month. A minimum balance is not required to
maintain an ETA.
o Check with your local bank to see if it offers this service and to learn what the specific
requirements are to open an ETA account.
 Your employer. Your employer may agree to cash your paycheck – meaning that you would write the
check over to him/her and he/she would give you the entire amount back in cash.
o There is an encouraging new trend among employers who employ a large number of workers
who might not know how to, or are reluctant to, use a bank.
o Employers are beginning to offer direct deposit of their paychecks through a local bank which
then provides employees with a debit card to access/withdraw their money for free. Ask your
employer for details.
 A military exchange on base. If you or a member of your family is in the military, the military exchange
on base should be able to cash checks and send money abroad either for free or for a small fee.
Payday Loans
The Federal Trade Commission warns against payday loans. Payday loans are short-term consumer loans for
small amounts, which need to be paid back on the date when the customer receives their next paycheck. In
most cases, consumers write a post-dated personal check for the advance amount, plus a fee. The lender
holds the check for the loan period and then deposits it or the consumer returns with cash to reclaim the
check.
In Washington state, the maximum loan term is 45 days and the maximum loan amount if $700. The maximum
fee that can be charged is 15% on the first $500 and 10% on amounts above $500. Let's say you want to
borrow $100 for 14 days. You write a personal check for $115. The check casher or payday lender agrees to
hold the check until your next payday. At that time, depending on the particular plan, the lender deposits the
check, you redeem the check by paying the $115 in cash, or you roll-over the check by paying a fee to extend
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the loan for another two weeks. The cost of the initial loan is a $15 fee which results in an APR of 391 %. If
you are unable to repay the loan in the time allowed, lenders will allow you to roll over the amount for another
period. If you roll-over the loan three times, the finance charge would climb to $60 to borrow $100. Using
payday loans is significantly more expensive than other forms of credit.
In Washington State, the average loan size was $385 in 2004, the average length of a loan was 17.9 days,
and the average fee per loan was $49.
There are additional risks related to payday loans. Some payday lenders will attempt an automatic withdrawal
once a day or more until the loan is paid off, so the cost of the NSF fees or bounced checks can add up rapidly.
This can lead to forced checking account closings and leave a customer’s other bills unpaid, lowering their
credit scores and impacting their ability to obtain fair loan (rates and fees) for such things as mortgages, cars,
credit cards or education loans.
Tips to Avoid High Cost Financial Services
 Save now for unexpected expenses—build some savings money before there is an unexpected expense
to avoid borrowing.
 Consider alternatives to payday loans:
o
If you open a bank or credit union account you could get a small loan at interest rates of 10-20%
instead of the 300+% that payday lenders or pawnbrokers charge. Some credit unions have
payday loans with lower fees.
o
o
o
o
Ask for an advance on pay from your employer.
Look for a small loan company.
Ask family or friends
Ask your creditors for more time to pay your bills and what fees (late charge or additional finance
charge) or interest rate they will charge for that service
 Contact the Department of Financial Institutions to verify that you are dealing with a licensed lender.
 Shop around for loans—don’t just look at the monthly payment. Compare the interest rate [annual
percentage rate (APR). The total amount you will repay, the number of payments, and the amount of
feeds added onto the loan.
 Borrow only as much as you can afford to repay with your next paycheck.
 Know when you payment is due and be sure to repay the loan on time and in full.
 Avoid borrowing from more than one lender at a time.
 Read before you sign. Be sure to read or have someone you trust read the loan papers before you sign
them. If the lender will not let you take them home to study them and tries to rush you, walk away. That
is a sign of trouble.
 If you need help working out a debt repayment plan with creditors or developing a spending plan contact
your local consumer credit counseling service. There are non-profit groups in every state that offer credit
guidance to consumers for little or no cost.
 Know your rights and the law:
o
o
o
o
o
You have the right to change your mind about the loan within one day.
You have the right to know all of the costs involved.
You have the right to a payment plan.
A payday lender may not threaten criminal prosecution as a method of collecting a past due loan.
Paying off an old loan with a new loan may be illegal.
 You can file a complaint with the DFI at 1-877-RING-DFI or at their website www.dfi.wa.gov. You can also
file a complaint by calling the Federal Trade Consumer Response Center toll free at 1-877-FTC-HELP
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(382-4357) or fill out the form at Federal Trade Commission Consumer Complaint online at: www.ftc.gov.
Click on Consumers, and then click on Credit to find the Complaint form.
Credit Reports
Fraud examiners recommend that people review their credit reports once a year; all three bureaus will need to
be contacted.

Equifax – To order a credit report: 800-685-1111. To report fraud: 800-525-6285

Experian – To order a credit report and report fraud: 888-EXPERIAN (888-397-3742)

Trans Union – To order a credit report: 800-888-4213. To report fraud: 800-680-7289
It’s also wise to opt out of pre-approved credit offers by calling 888-5-OPT-OUT (888-567-8688). This will stop
credit fraud. A scam artist can retrieve a discarded credit card offer and send it to the company, saying, “Yes,
I’m interested – and here’s my new mailing address!”
Identity Theft
The Federal Trade Commission received over 635,000 Consumer Sentinel complaints in 2004: 61%
represented fraud and 39% were identity theft complaints. Identity theft occurs when a thief uses another
person’s personal identification – name, address, Social Security number, date of birth, mother’s maiden
name, or other identifying information – to open new credit card accounts, take over existing accounts, obtain
loans in the victim’s name, steal funds from the victim’s checking, savings or investment accounts, lease cars
and apartments, or even apply for telephone service.

The victims go through a difficult and time-consuming ordeal to clear their names. They must first try to
convince the lenders and the credit-reporting agencies that they are victims of identity theft. They also
must deal with calls from collection agencies and endless paperwork in trying to remove erroneous
information and fraudulent accounts from a credit record.

Many victims of this fraud are unwittingly impersonated for years. They struggle to get their finances,
jobs, and lives back in order. The thieves seldom discriminate. For instance, several cases filed with
the Broward Sheriff’s Office in Ft. Lauderdale, Fla., revealed a variety of victims – from the
unemployed to the self-employed and from an electrician to a judge. The main offenses committed
were establishing public utility accounts, and obtaining credit cards to order merchandise in the
victims’ names. Identity thieves target everyone.
Credit card fraud (28%) was the most common form of reported identity theft followed by phone or utilities
fraud (19%), bank fraud (18%), and employment fraud (13%). Other significant categories of identity theft
reported by victims were government documents/benefits fraud and loan fraud. The percentage of complaints
about “Electronic Fund Transfer” related identity theft doubled between 2002 and 2004.
There are four types of identity theft crime:
 Financial ID Theft —This type of case typically focuses on your name and Social Security number (SSN).
This person may apply for telephone service, credit cards or loans, buy merchandise, lease cars or
apartments.
 Criminal ID Theft —The imposter in this crime provides the victim's information instead of his or her own
when stopped by law enforcement. Eventually when the warrant for arrest is issued, it is in the name of
the person issued the citation- yours.
 Identity Cloning —In this crime the imposter uses the victim's information to establish a new life. They
work and live as you. Examples: Illegal aliens, criminals avoiding warrants, people hiding from abusive
situations or becoming a "new person" to leave behind a poor work and financial history.
 Business or Commercial Identity Theft —Businesses are also victims of identity theft. Typically the
perpetrator gets credit cards or checking accounts in the name of the business. The business finds out
when unhappy suppliers send collection notices or their business rating score is affected.
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No matter what type of identity theft is involved, the result is a long road to recovery. As in all crimes, the key is
preventing the crime from occurring in the first place.
Where Thieves Get Information
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Garbage – pre-approved credit cards, bank and credit card statements, and utility bills
Mailboxes – both incoming and outgoing mail
Loan applications – banks, car dealerships, mortgage companies
Rental applications – cars or apartments
Schools – classroom attendance sheets that list the student’s Social Security number
Desk drawers in the workplace
Certifications/licenses placed on walls (in the workplace)
Job applications
Health club applications
Internet – information resulting from the sale of personal banking and investment details, chat rooms,
and false merchants
“Who’s Who in America,” which includes personal data
Telephone companies
Information freely given by the public – from warranty cards, for contests, to department stores, and
“Win a Free Membership…” forms
Advice to Avoid Identity Theft

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Don’t disclose any personal information that isn’t integral to a transaction.
Don’t keep your Social Security card in your wallet; bring only the one or two credit cards that you use
regularly.
Keep your Social Security number as private as possible. If a salesperson requests it, ask why. If your
health plan prints it on your membership card, ask for one without it. Don’t write it on your class
attendance sheet (your school already has your number on official records). Divulge this number only
for legitimate purposes, such as paying taxes, requesting credit, or obtaining a driver’s license.
Shred mail containing personal information – from account numbers to travel itineraries.
Prevent mail theft – don’t leave mail in your mailbox for the mail carrier. Don’t have new checkbooks
delivered to your home; pick them up from your bank.
Lock up your personal papers and canceled checks in your home, in case of a break-in.
Be cautious on the telephone. Never give out your name, address, Social Security number, or other
personal information unless you initiate the call.
Demand secure information handling. If you’re filling out a credit application at a department store or
auto dealership, find out what the establishment does with old applications. If it doesn’t lock them in
file cabinets or shred them, take your business elsewhere.
Pay attention to your bills. If you suddenly stop receiving your mail, particularly bills, that could be a
sign that someone has taken over your account.
Let federal, state, and local representatives know you’re concerned about this issue. Tell them you
want tougher laws against identity thieves and better protection from the credit industry.
Source: Beth Givens, director of the Privacy Rights Clearinghouse, a nonprofit consumer information and advocacy program in
San Diego, Calif.
Question 1:
What are the four types of identity theft crimes?
Question 2:
What are three tips to avoid identity theft?
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Activity 22: Review articles on ID Theft, Spyware, Phishing,etc.
Go to the website: www.OnGuardOnline.gov and choose one article of interest to you about ID Theft,
Spyware, etc. Print the article, read and highlight the most important points in this article, including tips to
protect you or your family.
What to do if you are a Victim of Identity Theft
The FTC maintains a Web site at www.ftc.gov/idtheft that is a one-stop national resource where consumers
can learn about the crime of ID Theft. The Identity Theft, Deter, Detect, and Defend section of the FTC
website, discusses the steps to take if it occurs. It provides detailed information and an online video to help
you. While there are no guarantees about avoiding identity theft, you can take steps to minimize your risk and
minimize the damage if a problem occurs.
Step 1: Call the toll-free fraud number of any one of the three major credit bureaus to place a fraud
alert on your credit report.
This can help prevent an identity thief from opening additional accounts in your name. As soon as the credit
bureau confirms your fraud alert, the other two credit bureaus will automatically be notified to place fraud
alerts, and all three credit reports will be sent to you free of charge.
Step 2: Report the ID theft to your bank, Credit Card Company and other creditors.
Ask to speak to someone in the security or fraud department. They may advise you to close your accounts and
start over with new ones. Also, ask your financial institution what procedures they require of victims whose
credit cards or checks have been stolen or forged.
Step 3: Report the ID theft to the police or sheriff in the area where you live.
Identity theft is a felony, and charges may be filed against the thief in the county where you live. Ask the police
to make a police report and give you a copy. You will need this to help correct your credit rating.
Step 4: Consider requesting a credit report security freeze.
A security freeze means that your credit file cannot be shared with potential creditors. A security freeze can
help prevent identity theft since most businesses will not open credit accounts without checking a consumer's
credit history first.
You, too, will not be able to open new credit while a freeze is in place. Individuals can request that a freeze be
temporarily lifted for the purpose of obtaining new credit.
Step 5: Send a copy of the police report to the three main credit reporting companies.
The credit bureaus are required to block information victims identify as resulting from identify theft. Once the
three consumer-reporting agencies receive the police report and a request from you, they are required to block
any adverse credit reports resulting from the crime.
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Step 6: Ask businesses to provide you with information about transactions made in your name.
Under the Identity Theft law, businesses must give you this information, but may, if they choose, require proof
of your identity—including a copy of the police report and your fingerprints. If you need to obtain your
fingerprints for this purpose, the Washington State Patrol provides this service. You will pay a fee and will have
to wait for processing before you receive a letter notifying you that the fingerprints are on file. Businesses
refusing to provide information to you may be subject to actual damages, plus a $1,000 penalty for willful
violations. You may present this letter to businesses and creditors as proof of your identity.
Step 7: Be prepared for contacts from creditors who may want you to pay the debts of ID thieves who
used stolen or fake checks to make purchases or pay bills in your name.
Explain to them that you have been the victim of identity theft. Provide them with the police report and, if you
have one, an Order Correcting Records. Once the collection agency has been notified that the debt is a result
of an identity theft, under the law the collection agency may not continue to call you. This prevents victims from
being inundated with calls for every misused check if they have had a box or book of checks stolen or forged.
Although calls might stop, you may still be subject to legal action by credit agencies. However, there are limits
on what a collection agency can do to try to collect a debt from you. The Attorney General’s Consumer
Protection web site provides more information about debt collection, or you can call the AG's consumer line
at 1-800-551-4636.
Step 8: Contact the Federal Trade Commission’s Identity Theft Hotline, 1-877-IDTHEFT or visit
http://www.ftc.gov/bcp/edu/microsites/idtheft/.
Close the accounts that you know or believe have been tampered with or opened fraudulently. Use the FTC
site that provides a uniform ID Theft Affidavit at http://www.ftc.gov/bcp/conline/pubs/credit/affidavit.pdf when
disputing new unauthorized accounts. The ID Theft Affidavit is accepted and endorsed by many businesses.
Step 9: Tell the prosecuting attorney that if the person who stole your identity is found guilty, you'd
like the court to issue you an Order Correcting Public Records.
This Court Order you can use to correct public records damaged by identity theft. Show the Order Correcting
Records to your bank and send a copy to your creditors so they can correct your records.
Fraud
Each year millions of individuals are victims of con schemes, and the losses are staggering - in the hundreds
of millions of dollars. Both individuals and businesses are potential targets for these schemes. Con schemes
affect people of every age, gender, religious belief, educational level, society status, and geographic location.
Virtually no one is immune from the exposure to these frauds.
In the 21st century, scam artists use the Internet, computers, telephones, printers, and scanners as their
weapons, and they do not even have to leave their homes to capture their victims. To further exacerbate the
problem, people can be victimized in their own homes without being aware of it. Be aware of the following “red
flags”:
 Advance fees required with cash, credit card, or checking account number;
 Promises of substantial profits or returns on investment;
 Promises of little or no risk guaranteed;
 Sense of urgency in response/must act immediately;
 Little or no effort and/or experience required; and
 Refunds not available or difficult to obtain.
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Salespeople are trained to use a variety of tactics to “close the deal.” These tactics are also used by scam
artists to get at your money. It’s important you learn to resist these influence tactics so you can evaluate the
purchase objectively. Identify the pattern and know that you are a target. Here are some of the tactics:
•
•
•
•
•
•
•
•
•
•
Phantom Fixation – The objective is to put something that is completely unavailable before you that
appeals to health issues, wealth, popularity or avoiding death. Basically this tactic preys on your
insecurities and promises to fulfill your wildest dreams. It falls into the category of too-good-to-be-true
and most often is.
Commitment – The salesperson tries to get you to commit but saying that your earnest money or
deposit will be lost. Often there are laws that say you have 3 days to reconsider and get your funds
back in full. Know your rights before you go in to buy.
Authority – The salesperson will say that they’ve been in the business for years and know that this is
the best deal that they’ve seen. They might cite specific features. If you don’t know the product well,
you might believe the pitch.
Social Proof – This tactic tries to get you to believe that everyone is getting one so you should, too.
Scarcity – This includes product scarcity (only three left) , time scarcity (offer good only today), and
threats to take the offer away which often makes the consumer feel pressure to buy now.
Comparison – It is very common for sales pitches to show inflated regular prices to a hugely
discounted “sales price.” You need to comparison shop to see what kind of deal it really is.
Profiling – In cases where the salesperson wants to make a large sale, they will probe for personal
information and then customizes pitch.
Friendship – The salesperson changes the relationship from con to victim into a friendship transaction.
Reciprocity – The sales pitch gives you a free gift or lunch. With this your response rate doubles.
Landscaping – The salesperson changes social interaction so it leads to where he or she wants to go
by setting the agenda, limiting choices or controlling information.
People are more prone to be susceptible to influence tactics when they’ve had some negative event in their
lives. These can be as major as losing a job, divorce or a death in the family. It can be because you’ve been
chewed out by your boss. Try to be aware of your mental state and don’t engage in any major buying. Watch
those around you to alert them.
The Major Types of Fraud
Identity theft complaints represented 37 percent of the 686,683 complaints filed in 2005. Other top categories
of fraud complaints for 2005 include:
 Internet Auctions - 12 percent
 Foreign Money Offers - 8 percent
 Shop-at-Home/Catalog Sales - 8 percent
 Prizes/Sweepstakes and Lotteries - 7 percent
 Internet Services and Computer Complaints - 5 percent
 Business Opportunities and Work-at-Home plans - 2 percent
 Advance-Fee Loans and Credit Protection - 2 percent
 Telephone Services - 2 percent
 Other - 17 percent
Other findings from the report include the following:
 Internet-related complaints accounted for 46 percent of all fraud complaints.
 The percent of Internet-related fraud complaints with “wire transfer” as the reported payment method more
than tripled between 2003 and 2005.
 The major metropolitan areas with the highest per capita rates of consumer fraud reported were
Washington, DC; Tampa/St. Petersburg/Clearwater, FL; and Seattle, WA.
 Credit card fraud was the most common form of reported identity theft, followed by phone or utilities fraud,
bank fraud, and employment fraud.
 The most frequently reported type of identity theft bank fraud was electronic funds transfers.
 The major metropolitan areas with the highest per capita rates of reported identity theft were
Phoenix/Mesa/Scottsdale, AZ; Las Vegas/Paradise, NV; and Riverside/San Bernardino/Ontario, CA.
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 Consumers reported fraud losses of over $547 million; the median monetary loss was $259.
Effects on Consumers

Everyone is a potential victim but, as mentioned earlier, everyone also feels the effects of these
schemes either directly or indirectly.

The direct effects of these con schemes on victims may be financial, emotional, sociological,
psychological, and/or physical. Financially, victims may have lost their life savings or their credit
histories may have been destroyed. Emotionally, they may feel betrayed, shamed, helpless, angry,
guilty, as well as fearful. Sociologically, they may believe they have lost professional credibility in
business and the respect of family and friends. Psychologically, they can become depressed or have
sleeping disorders. Physically, they may experience health problems that may be attributed to the
financial, emotional, psychological, and/or sociological effects.

Indirectly, these schemes affect all consumers over time. Economically, investment swindles and other
con schemes lead to increases in the cost of credit, health insurance, and taxes. The cost of providing
security to cover losses that financial institutions bear as a result of these con schemes is reflected in
the high interest rates charged to consumers for credit. The effects of these con schemes on victims
may lead them to some type of health care, and the increase in health care demands fosters an
increase in the rates of health insurance. Law enforcement and other government agencies require
resources to remain current on advanced technologies used to detect and deter fraud. These
resources are acquired through taxes.
Take Action against Fraud
“Buyer beware!” Several government websites list valuable detailed information on fraud and prevention
techniques.
If you have received bad product or service from a merchant or business, take the time to file a complaint.
 Complain to the business in writing and use registered mail. Document everything.
 If it is a business, file complaints with the Better Business Bureau www.bbb.org.
 Complaints against businesses and financial service providers can be filed with the Washington State
Attorney General’s office http://www.atg.wa.gov/. and Washington State Department of Financial
Institutions, www.dfi.wa.gov
If you have a complaint about a bank or other financial institution, the Federal Reserve System may be able to
help you. The Federal Reserve System investigates consumer complaints received against state-chartered
banks that are members of the Federal Reserve System. Complaints about these types of banks will be
investigated by 1 of the 12 Federal Reserve Banks around the country. The Federal Reserve will refer
complaints about other institutions to the appropriate federal regulatory agency and let you know where your
complaint has been referred. You may also write directly to the appropriate federal agency by referring to the
listing at the end of this publication. Many of these agencies do not handle individual complaints; however,
they will use information about your credit experiences to help enforce the credit laws.
When writing to the Federal Reserve, you should submit your complaint—in writing whenever possible—to the
Federal Reserve, Division of Consumer and Community Affairs, Board of Governors of the Federal
Reserve System, Washington, DC 20551.
 Be sure to provide the complete name and address of the bank, a brief description of your complaint, and
any documentation that may help in investigating your complaint.
 Do not send original documents, only copies; remember to sign and date your letter.
 The Federal Reserve will acknowledge your complaint within 15 business days, letting you know whether
a Federal Reserve Bank will investigate your complaint or whether your complaint will be forwarded to
another federal agency for attention.
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For complaints investigated by the Federal Reserve (those involving state-chartered member banks), the
Reserve Bank will analyze the bank’s response to your complaint to ensure that your concerns have been
addressed and will send you a letter about the findings. If the investigation reveals that a Federal Reserve
regulation has been violated, the Reserve Bank will inform you of the violation and the corrective action the
bank has been directed to take.
Although the Federal Reserve investigates all complaints about the banks it regulates, it does not have the
authority to resolve all types of problems, such as contractual or factual disputes or disagreements about bank
policies or procedures. In many instances, however, if you file a complaint, a bank may voluntarily work with
you to resolve your situation. If the matter is not resolved, we will advise you whether you should consider
legal counsel to resolve your complaint.
FTC’s web site at http://www.consumer.gov/sentinel/pubs/Top10Fraud2005.pdf lists additional helpful
consumer information about fraud and identity theft.
 Also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W.,
Washington, D.C. 20580.
 The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the
marketplace and to provide information to help consumers spot, stop, and avoid them.
 To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get
free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use
the complaint form at http://www.ftc.gov.
 The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer
Sentinel, a secure, online database available to more than 1,400 civil and criminal law enforcement
agencies in the U.S. and abroad.
Internet Fraud
OnGuardOnline.gov provides practical tips from the federal government and the technology industry to help
you: guard against Internet fraud, secure your computer, and protect your personal information.
Activity In-Class: Protect Yourself --Take Quizzes on Identity Theft, Spyware,
Phishing, Spam Scam Slam, Online Shopping
As a class activity, go online to the OnGuard website to check your knowledge about many electronic crimes
at www.onguardonline.gov/quiz. There are a series of nine short fun, colorful quizzes to test your knowledge
to protect yourself, your work or your family.
Online Resources:
There are several great websites that give many descriptions, examples and explanations.
AARP, Be a Wise Consumer, http://www.aarp.org/money/wise_consumer/
Be Crime Smart, Federal Bureau of Investigation, www.fbi.gov
Federal Trade Commission (FTC) Consumer Information-ID Theft, www.ftc.gov/ftc/consumer.htm
www.ftc.gov/idtheft
MyMoney.gov, America’s One Stop Shop for Free Personal Finance Information from the Federal
Government, www.mymoney.gov
The ID Theft Resource Center, www.idtheftcenter.org/index.shtml
Washington State Attorney General, Identity Theft—A Guide for Consumers, www.atg.wa.gov
Washington State Department of Financial Institutions, Consumer Protection information,
http://www.dfi.wa.gov/
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Unit 6: Learn Money-Saving Tips
One in four Americans is financially stressed. This means they are experiencing high or extremely high levels
of stress about their financial situation. Seven out of 10 Americans live from paycheck to paycheck. Yet on the
other hand, Americans throw out on average $590 in food per family every year and 68 pounds of clothing per
personal per year. Used clothing (mostly donated) totals 7 billion pounds a year and grows at 10% year. This
shows that Americans are living beyond their means to pay for items that they will discard. Past experience
shows that Americans don’t have to be in this rat race of spending and wasting.
2004 Expenses by Family Size.
One person
Expenditures Total (In dollars)
Two person
Three person Four person Five or more
$23,507
$40,359
$45,508
$54,395
$53,805
Food at home
1,533
2,954
3,696
4,404
5,151
Food away from home
1,302
2,336
2,512
3,043
3,042
314
400
315
368
309
Housing
8,371
12,944
14,744
17,914
17,317
Apparel
862
1,650
2,013
2,643
2,893
Transportation
4,012
7,692
9,348
10,775
11,123
Healthcare
1,441
2,827
2,265
2,253
2,150
Entertainment
Alcoholic beverages
1,097
2,051
2,137
2,787
2,718
Personal
297
512
555
614
658
Reading
111
168
139
155
131
Education
423
476
830
1,059
984
Tobacco
203
312
397
349
416
Miscellaneous
518
744
843
1,156
743
Cash contributions
1,063
1,429
1,167
1,287
1,399
Personal insurance and pensions
1,960
3,864
4,547
5,589
4,770
Personal Taxes
1,829
3,599
3,066
3,900
2,652
Source: 2004 Consumer Expenditure Survey
Buy only what you need. For purchases over $100 take at least 24 hours to decide whether it is a want or
need. Think about how many hours you worked to pay for the item. Research the product thoroughly. Find the
best price and then negotiate for an even lower price. Think carefully about how you can reduce your debt by
taking a shorter term loan, making a bigger down payment or comparing prices. If you have trouble with a
business, report it to the Better Business Bureau www.bbb.org or the appropriate state agency.
Expenses

Opportunities
Put savings as the top
priority on your
spending plan

Set aside money by taking full advantage of your employer match on 401Ks and using
automatic deposit into your saving account. Don’t touch this money. Let it work for you.
In addition to your retirement accounts, create a saving account that is just for saving
for financial goals. Don’t spend the money on other needs or wants.
Take every opportunity to save. Put all loose change into the bank. Set aside $5 from
your wallet every week in a safe place and then put it in the bank every month.
When you get a raise, increase your automatic savings so you can’t spend your raise.
Put your tax refund into your saving account.
Cash out gift certificates and put the money in the bank. (40% of gift certificates are
not redeemed.)
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Fees and finance
charges
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Food at home
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Food away from home
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A Consumer Federation Association (CFA) study estimated that a typical
family earning $20,000 a year can expect to spend between $86 and $500 a
year for check-cashing services. In contrast, a bank would offer the same
services for approximately $30-60 annually. Avoid high-cost financing such as
pay day loans and check cashing services by maintaining a bank account and a small
line of credit. Maintain a small emergency fund ($2000 will cover most emergencies).
Get your bank to automatically set aside $20 every paycheck for this fund.
Keep credit cards to a minimum (two) and this will keep you from spending. To save
even more, use cash for everyday expenses.
Credit card companies and banks charge all kinds of fees. Avoid these by keeping on
top of each of your accounts. If you cannot reconcile every account you have, you
need to reduce the number of accounts you have. Check every single transaction and
put in place safeguards to stop any fees or finance charges from being assessed.
Pay all credit card balances on time. If you do have a balance, make sure that you are
paying the lowest interest rate you can. Comparison shop other credit cards to see if
you can lower it.
Call and ask for a reduction in any fees that you pay.
Keep a good credit rating so you can save on insurance, interest rates, and look good
to potential employers.
Talk to your banker regularly to see how you can get higher interest rates.
Most folks consider food at home a need that can’t be cut, but US families throw away
$590 in food a year. Also the obesity epidemic (65% of Americans are overweight )
and typical food servings now are three times that of 1955 says that we can cut down
on food. A good suggestion is to half everything. Cook half as much food, use half the
amount of salad dressing, etc. This is a good way of cutting down.
Don’t shop on an empty stomach. Shop with a list and buy only items on the list. Buy
sale items.
Families who are able to live on less take the time to plan out their meals. Some plan
for the whole month. This allows them to shop less (once a week or once a month),
buy food in bulk, and take advantage of sales. Planning meals also is a better way of
controlling what you eat. Saving money and improving your health can go hand in
hand.
Food away from home costs three times or more than food at home, therefore cutting
out any meals away from home saves you money. Start with lunch at work. Bring your
lunch. It’s a good way to make use of food you might have thrown away. Buy a coffee
maker and make your own coffee.
When you do eat out, use coupons or discounts. Cutting everything in half also works
with food away from home. Share a meal with someone else. If no one wants to share
with you, be sure to box your leftovers and take them home for another meal.
Alcoholic beverages
and tobacco

Alcoholic beverages and tobacco are considered discretionary expenses and should
be reduced when possible.
Housing

Putting an extra payment to your mortgage each year may not seem like a way to save
money but doing so on a 30-year $400,000 mortgage will allow you to pay off the
mortgage 7 years early and save $100,000 in finance charges.
By making your house more energy efficient with fluorescent bulbs and such, you may
be able to save on energy costs and be more friendly to the environment. Switch off all
lights that you don’t use and unplug electronics you are not using.
Look carefully at telephone bills (comparison shop your cell phone provider) and
evaluate whether you need both cell and land line. Cancel your cable and comparison
shop your internet provider or advocate for free wifi in your community.
Review your tax assessment every year and protest if you think the assessment is too
high.
For any major appliances or furniture, shop during the off season (July).
Learn how to do repairs by yourself rather than paying someone to do them.
Swap plants rather than buy them.
Ask your friends to help with large jobs and help them in return.
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Apparel


Transportation



Americans throw out 68 pounds of clothing per person per year. This doesn’t include
the 7 billion pounds that we donate or sell in a year. We’ve moved from a society that
used to mend and hand down clothing to one that engages in disposable clothes.
Studies have already shown that most people wear 20% of their clothes 80% of the
time. Resist the urge to buy more clothes. Most likely, the new piece of clothing is
completely unnecessary.
Other people reduce clothing costs by buying used clothing, shopping at the end of the
season for bargains, and shopping at discount stores. Arrange for clothing swaps
when children outgrow their clothing.
The US has more motor vehicles than the rest of the world combined. Motor vehicles
are expensive forms of transportation. Families who switched from cars to walking or
bilking save significant money and gain health benefits. A switch from cars to public
transportation can also save significant money. The Seattle Times estimates you will
save $1800. When your child goes to college, leave the car at home.
Reducing the amount of driving by car pooling can also save money.
Maintain your car properly to save money on repairs and comparison shop insurance.
Drive safely to keep your insurance costs down.
Healthcare

Prevention is always better than the cure. Save money on healthcare by taking care of
your health. Eat properly (and less) and exercise (more). For other savings, use
generic drugs instead of brand names. Taking care of yourself can help save on life
and health insurance as well.
Entertainment

Entertainment is discretionary. Cutting out expenses doesn’t mean that you won’t have
fun. There are lots of low cost ways of enjoying yourself including taking hikes and
visiting museums on the “free” days. Patience is a huge helper in saving money.
Instead of seeing the movie, wait for the video. Don’t rent or buy videos when they
come out. Wait and borrow your videos from the library. Patience can also help you
save money on electronics. Electronics prices go down 18% in a year. The more
patient you are, the more you will save on any purchase.
Education (For college
students)

Saving for education with a tax-advantaged saving plan is much cheaper than taking
out a student loan.
Take out only what you absolutely need in student loans.
Look for work study or grant opportunities (Pell) to reduce tuition.
When shopping for textbooks, start early and check online for used copies. This can
be much cheaper than buying them new.
Draw up a spending plan. Use cash instead of credit cards. Take full advantage of
college meal plans and facilities to save money.
Contribute any earnings to a Roth IRA.
Keep organized records as they may be important for applying for aid or saving on
taxes.
Pay all your bills on time. This will save you finance charges and give you a good
credit score start.
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
Gifts


Taxes

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2009
Instead of gifts for kids, give contributions to college funds. Consider giving a service
rather than buying an item.
If you must buy items, buy them out-of-season such as after Christmas, at the end of
summer or end of winter during clearance sales.
It is estimated that about $1 billion of earned income credits are not claimed by eligible
taxpayers. Earned income credit is a refundable credit meaning even if you don’t pay
taxes, you are entitled to get it as a refund from the government. Check with a tax
preparer to see if you qualify.
Fill out W-4 withholding forms correctly so you don’t over withhold taxes or pay too little
taxes.
Keep good records to you don’t miss out on any deductions.
Pay your taxes on time so you aren’t hit with tax penalties or interest.
79
Tips for Women
Women protect their families from many types of hazards. But do they protect themselves? About 50% of
marriages end in divorce, so having a spouse handle the money tasks is a risk that could leave a woman
financially vulnerable. Disease and accidents can claim loved ones. Women should know that there are
simple, effective, practical ways to protect themselves…just in case.
1. Establish and maintain your own credit record
If every bank account and credit card is in your spouse's name, you will not have any financial records with
credit in your own name without him. Before you do anything else, open a bank account and get a credit card
in your name.
2. Participate fully in all legal and financial activities.
Look over all legal documents, tax returns, investment agreements, and real estate contracts carefully. Jointly
create a spending plan. If partners have completely different financial perspectives, you may have to create
two plans.
3. Define which assets are yours, mine and ours.
Continue to have assets that are in your name. A postnuptial agreement can protect assets acquired after the
marriage, such as an inheritance. Make sure that you're listed on the deed to your home as joint owner or that
the house is classified as community property. If you should die, the chances are very high your spouse would
remarry. If he then passed away, all the assets would go to the new wife under Washington State’s community
property law, if you were not listed on the original house documents.
4. Create a will
Sometimes women feel uncomfortable participating in financial decisions. For your protection, be aware of
what the money comes in and where it goes. Some couples take turns paying bills on an annual basis.
5. Contribute to your retirement savings.
If you’ve taken the bulk of the care giving responsibilities, make sure your spouse makes a full contribution to
your IRA. Check to see if joint and survivor has been selected for any pension plans.
There are several organizations and authors that write money saving tips for women, including:
 Jean Chatzky’s Become a Savvier Shopper at www.oprah.com/jean
 David Bach’s Debt Diet found at the website: www.oprah.com , Finish Rich other resources at:
http://www.finishrich.com/pages/home.php
 Suze Orman shows you how you can start living an authentic life, control your finances and reconnect with
yourself by making your financial health a priority on the website: www.oprah.com and at
http://www.suzeorman.com/ and in her book, Women and Money
Activity 23: Savings Tips and Knowledge Quiz
The General Services Administration of the federal government and Federal Citizen Information Center (FCIC)
have a terrific website with savings for you and your family in many categories from transportation—cars, car
repair; housing; utilities; banking and credit; insurance; food; and prescription drugs. www.66ways.org.
A. Take the Knowledge Quiz to see how you rate.
B. Read the 66 Ways to Save Money and write up 5 ways that you will try to adopt that make sense for
you or your family to save money.
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More Money Saving Tips
What you don't see, you don't spend. Saving means giving up something now, so you will have more in the
future. It's not easy deferring or eliminating purchases you want today.
Pay yourself first. Take a portion of savings from every paycheck before you pay any bills. Use your
company's payroll deduction plan if available. Arrange for a fixed amount to be taken out so that you never see
it. What you don't see, you don't spend. You also can direct automatic checking account withdrawals into a
savings account or money market.
Join the company's retirement-savings plan (such as a 401K or 403B). Your contribution avoids current
taxes and accumulates tax deferred. Also, companies sometimes match some of your contributions.
Other Saving Tips:

When you get a raise, save all or most of it.

Pay off your credit card balances and save the money you're no longer spending on interest.

Shift credit card balances to a card with a lower interest rate and use the savings to pay off the balance.

Keep your car a year or two longer. Do routine maintenance and make regular repairs. Save the money
you would have spent on a new car.

Stop smoking.

Take $5 from your wallet every day and put it in a safe place. That will add up to $1,825 in a year.

Shop with a list and stick to it.

Don't buy any new clothes until you've paid off your current clothing bills.

Eat more meals at home.

Look for inexpensive entertainment: zoos, museums, parks, walks, biking, library books, concerts, movies
and picnics.

Shop for less expensive insurance.

Save all tax refunds.

Drop subscriptions to publications you don't read.

Postpone purchases or consider fewer features on the items you plan to purchase.
Adapted from the Federal Reserve Bank
The less you spend, the more you can save. And the longer you can consistently save, the faster your
savings will grow.
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Conserve - Spend Sensibly; Pay Wisely
Experts recommend paying with cash whenever possible. This helps you spend less than you otherwise would
have spent if you had charged the purchase. You'll also avoid credit card interest charges and check-cashing
fees.
Activity 24: Identify Savings Tips for You (and Your Family)
1. List relevant ways to save now and in the future.
2. Go online and find 2 websites that you would recommend to the class that list money saving tips.
A. List the websites’ addresses and the website name or sponsor.
B. What helpful information does the website provide?
C. Why are you recommending these sites as helpful “money-saving” sites?
Strategies for Buying Well
Before you buy, determine whether you need the item. If it is a large purchase, wait 24 hours. For work done
for you by contractors and others, check out the business’ credentials. Get references and call them. Look at
the work done by the firm. Check for complaints about the business at the Better Business Bureau website,
www.bbb.org and the Washington State Attorney General’s office http://www.atg.wa.gov/. Many credit
issues revolve around defective products and services. “Google” the contractor to see if they have complaints
against them in other states.
Once you’ve decided to make the purchase, then determine what features you need and what price you will
pay. This takes a tremendous amount of research. Sadly, most people do not take the time to do thorough
research so they pay too much. To conserve your wealth you don’t want to pay too much. Understand
everything that is needed to negotiate the best price. This means that you should comparison shop. The
internet is a good place to start.
Once you have found the best price, look at the various options you have to borrow money to finance your
purchases. Again, you have to do the research and evaluation to choose the best option.
Online Resources:
40 Ways to Save Money for College Students, http://www.scholarshipamerica.org/ss/files/40moneytips.pdf
66 Ways to Save Money, Consumer Literacy Consortium, www.66ways.org.
America Saves-You Can Build Wealth, www.americasaves.org
Become a Savvier Shopper, Jean Chatzky, www.oprah.com/jean
Debt Diet, David Bach, www.oprah.com or http://www.finishrich.com/pages/home.php
Federal Reserve Bank of Chicago, “How to Spending Plan and Save Money,”
http://www.chicagofed.org/consumer_information/budgeting_and_saving.cfm
How to start living an authentic life, control your finances and reconnect with yourself by making your
financial health a priority, Suze Orman, www.oprah.com or http://www.suzeorman.com/
Thirty Tips to Become Rich, National Endowment for Financial Education, created to provide Americans
with practical money-management skills and an introduction to financial planning and the fundamentals of
money management, http://www.ntrbonline.org/
Tips for college students and college grads http://teenadvice.about.com/cs/collegelife/a/bl10moneytips.htm
What Every Married Woman Should Know About Money, Carol Mithers, www.oprah.com
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Summary: BEGIN NOW- Take Action with Your
Finances!
Check the ones you will begin NOW! 
___
Sign up for Automatic Savings with your employer, bank or brokerage to have $____ a
month taken out of your paycheck and deposited into a separate money market account or
money market fund so you won’t use it.
___
Get a Will by calling a local attorney. Consider a healthcare medical directive and a durable
power of attorney to go with it. Expect to pay $500-1,550. Or go online to find software
available. You will be protecting your loved ones.
___
Take a Breather Before You Buy. Consider your options before you buying any impulse
purchases (something you didn’t go to buy at the store or online). You can save money by
not adding to your purchases or not going into a store you know you have splurged before.
___
Safeguard Your Credit Score by paying your bills on time and paying down the balances of
your credit cards.
___
Pay Off Credit Cards by Using Your Savings. Use the money out of your savings or
money market funds to pay off high-rate credit card debt, since you’re making 3-5% interest
on your savings and paying 13, 15 or 20% on your credit card. You’ll be saving 10-15% in
credit card interest payments.
___
Utilize More of Your Paycheck. Call your employee benefits department to sign up for
401(K), 403(b) or other pre-tax deductions such as flexible spending accounts for
healthcare, and day care.
___
Use Cash or Your Debit Card, not your credit card to avoid credit card excessive debt and
payment problems.
___
2009
Save Money on Insurance for car, home, renter, and life insurance. Compare quotes.
83
Works Cited
12 Reasons Budgeting Can Improve Your Life, About.com: Financial Planning
http://financialplan.about.com/cs/budgeting/a/12ReasonsBudget.htm
360° of Financial Literacy, American Institute of Certified Public Accountants,
http://www.360financialliteracy.org/
Before You Enter a Check Cashing Store, AARP, http://www.aarp.org/money/credit_debt/a2002-10-04CreditDebtFringeBanks.html
Browne, Joy, “How to Set Goals –And Reach Them”, Parade, Seattle-Times, March 18, 2007.
Chatzy Jean, “Eight Ways to Start Making Money. . . ,” Make Money, Not Excuses.
http://www.oprah.com/money/money_landing.jhtml
Choose to Save.org, a partnership with Employee Benefit Research Institute (EBRI) and its American Savings
Education Council (ASEC) program, www.ChoosetoSave.org
Consumer Information, Department of Financial Institutions, www.dfi.wa.gov
Federal Reserve Board, Choosing a Credit Card, April 11, 2007, www.federalreserve.gov/pubs/shop
Federal Reserve Bulletin 2006, “Federal Reserve Board’s Survey of Consumer Finances for 2004,” p. A12.
Federal Trade Commission, “National and State Trends in Fraud and Identity Theft January-December 2004”,
Report date: February 1, 2005.
Federal Trade Commission, Payday Loans=Costly Cash. February 2000.
http://www.ftc.gov/bcp/conline/pubs/alerts/pdayalrt.htm
Financial Literacy 2007 - Guide to Building Personal Wealth Bankrate.com.
http://www.bankrate.com/brm/news/Financial_Literacy/Financial_Literacy_toc_a1_v2.asp
Financial Literacy, Washington Society of Certified Public Accounts,
https://www.wscpa.org/wscpa/FinLit/resources.cfm
Financial Literacy: Improving Education, Jump$tart Coalition for Personal Financial Literacy, Washington, DC,
November 2006.
Fossen, Linda and Julie Ann Larson Needs, Wants and Goals, University of Texas at Brownsville, Nov. 2005
Mithers. Carol. “What Every Married Woman Should Know About Money”. O, The Oprah Magazine. March
2005. www.oprah.com
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Money 101: A Step by Step Guide to Control of your financial life. CNNMoney.com.
http://money.cnn.com/magazines/moneymag/money101/
Money Management, Young Money. www.youngmoney.com/money_management
Money Mechanics—Spending Plans, Iowa State University, University Extension, December 2004,
http://www.extension.iastate.edu/Publications/PM1454A.pdf
More About. . . Check-Cashing Stores and Sending Money Abroad. The Bond Market Foundation.
http://tomorrowsmoney.org/section.cfm/more_about/check_cashing
Putting a Spending Plan Together, Young Money. 2002, www.youngmoney.com
http://www.youngmoney.com/money_management/budgeting/020809_06
The Secret to Budgeting Successfully. About.com: Financial Planning.
http://financialplan.about.com/cs/budgeting/a/SecretBudget.htm
Tierney, Karen J. “FRAUDBASICS, Part One -Con Schemes Abound,” Association of Certified Fraud
Examiners, January/February 2003
What financial records to keep, how long to keep them. Bankrate.com. 13 Sep. 2005.
http://www.bankrate.com/brm/news/mtg/20000518h.asp
You Can Build Wealth, America Saves-, www.americasaves.org
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